Transfers

What Transferring Means

The portability of pensions means that when members come to retire, their benefits can be held in one fund. SPPA can accept transfers from or to most pension schemes, although there are different types of transfer.

A transfer value is a single payment from or to the Scottish Teachers' Superannuation Scheme (STSS) and is paid by/paid to another pension scheme or arrangement. The transfer value is converted into pensionable service, which is added to accrued service and therefore reckons for all benefits in the STSS.

Eligibility

There are time limits to transfer from, or to the STSS.

Transfers completed on or after 6th April 2006 must be from one of the HMRC registered pension schemes to another. A transfer between two registered pension schemes is known as an authorised transfer, also known as a recognised transfer and no tax charge applies to these transfers.

Responsibilities

SPPA, employers and employees have specific responsibilities when dealing with transfers from and to the STSS. These are listed below and must be adhered to.

Employer Responsibilities

It is essential that member's pension records are kept up to date and necessary forms, in particular, termination documents, are completed in full and submitted to SPPA timeously. It is also crucial that employers respond to requests for information timeously.

Employers should also make the member aware of their rights to transfer immediately on joining the STSS by providing the member with the appropriate guide to the scheme, which includes information on transferring benefits, and also the Starter letter. Employers are also required to complete Form B from the Transfer Application letter when requested by the member without delay.

SPPA Responsibilities

On receipt of a transfer request SPPA is required to ensure that all information relating to the transfer value calculation is obtained, received or issued and the appropriate action is taken within specific timeframes, including updating the member's record.

SPPA is obliged to acknowledge a transfer out request within 15 days and must also, in compliance with the Pensions Act 1995, supply transfer out information within 3 months of the request.

Employee Responsibilities

An employee is required to request a transfer in or out of the STSS within the required timescales and provide the necessary information as required.

Transfer Tables

The STSS, along with other Public Sector schemes, base all transfer calculations on standard factor tables provided by the Scheme Actuary. All pension schemes must now provide a transfer value based on converting the value of a member's pension rights to a current cash equivalent value.

The member will receive pensionable service strictly in accordance with the actuarial assessment of what that transfer value will buy when transferring to another scheme.

Advice

Unfortunately, SPPA is unable to offer advice and recommends that independent advice is sought by the member should there be any doubt as to whether a transfer is their best option. There is no pressure on the member to transfer their benefits even if an enquiry has been made. However, SPPA cannot cancel a transfer from the STSS to another pension provider once payment has been sent to the new scheme. Equally, SPPA cannot cancel a transfer in for once payment has been received.

Scheme members may wish to seek financial advice before deciding on whether to transfer their benefits. SPPA cannot offer any advice however the following organisations provide information which may be of help:

The Financial Conduct Authority or contact:

The Financial Conduct Authority

25 The North Colonnade

London

E14 5HS

The Pensions Regulator or contact:

The Pensions Regulator

Napier House

Trafalgar Place

Brighton

BN1 4DW

The Pensions Advisory Service or contact:

The Pensions Advisory Service

11 Belgrave Road

London

SW1V 1RB

Types of Transfer In

There are different types of pension schemes that can be transferred in to the STSS. These are as follows. However, SPPA cannot cancel a transfer in for which payment has been received.

Transfers from out with Scotland

If a member has been working for an employer superannuated by Teachers Pensions England & Wales, Northern Ireland or Isle of Man, they may wish to transfer these benefits to the STSS.

Public Sector Transfer Club

These are public and private sector occupational pension schemes, like the STSS, who are all members of the Public Sector Transfer Club, also known as "the Club". Other examples of Club schemes are the Local Government Pension Scheme, Civil Service Pension Scheme and NHS Pension Scheme. All schemes within the 'Club' calculate transfer values based on standard factor tables and guidance provided by the Scheme Actuary.

Non Public Sector Transfer Club

Any pension providers who are not employee's of the 'Club', are known as 'Non-Club Schemes' and include other occupational pension schemes, Section 32 Buy-Out policies, personal pensions administered by insurance companies, banks etc. and contracted out/in money purchase schemes.

Qualifying Recognised Overseas Pension Schemes (QROPS)

SPPA can only consider a transfer from an overseas pension scheme which is classed as a Qualifying Recognised Overseas Pension Scheme, approval for which is granted by HMRC (see www.hmrc.gov.uk for more information). HMRC will issue the scheme with an acceptance letter, a copy of which must be provided before any request for an overseas transfer can be considered. Transfer in payments must be made in Pounds Sterling for non EEC countries. Euros are acceptable for EEC employees.

Time Limits & Procedures for Transferring in

There are specific time limits for requesting a transfer in to the STSS depending on the type of the previous pension scheme and the date that the member joins or re-joins the STSS.

Pension Schemes out with Scotland

There is no time limit to transfer in from another Teachers scheme out with Scotland. Once requested, the transfer in is automatic and the member will not be given an estimate. SPPA request the transfer in information from the former Teachers scheme and sends the member an acknowledgement letter.

If the member has an AVC or Additional Pension (AP) arrangement with another Teachers' scheme and wishes to continue this, then they are advised to transfer in as soon as possible in order to avoid an arrears situation. SPPA will advise the employer accordingly who will be responsible for implementing the continuation of the AP contract and contacting the member to arrange collection of any AP arrears which may be due. In the case of Free Standing AVC's (FSAVC) under the scheme's money purchase arrangement, employees are required to arrange continuation of payment with the Standard Life Assurance Society. A transfer in is not possible if the FSAVC incorporates contributions to contract the member out of State Second Pension. There are no time limits involved, however, the AVC fund cannot be transferred to the STSS for conversion into a main scheme membership credit.

The transfer in procedure can take up to 6 months and once complete SPPA will inform the member of the actual pensionable service credit transferred.

If the transfers are from differing sections then the service credit will not result in a like for like transfer in. In such cases SPPA will send an estimate to the member seeking permission to progress with the transfer in.

Public Sector Transfer Club

A member has 12 months from joining or re joining the STSS to request a transfer in from a Public Sector Transfer Club scheme.

Where the member joins or re joins the STSS and has more than one consecutive pensionable employment, the 12 months time limit will apply from the commencement date of the first pensionable employment.

SPPA will request a transfer in value from the former Club scheme and send the member an acknowledgement letter. Once a transfer in value is received SPPA will calculate a service credit and send the member an estimate of this credit along with options forms to be completed and returned.

If the member elects for the transfer in to go ahead SPPA will request payment from the former scheme and when payment is cleared an award calculation is carried out. The member will then be sent a letter from SPPA confirming the service credit and the completion of the transfer in.

The member's age, gender and pensionable salary that the former scheme used in their transfer calculation will be used in SPPA's calculation. 'Club' calculate transfer values based on standard factor tables and guidance provided by the Government Actuaries Department.

Non Public Sector Transfer Club

A member has 12 months from joining or re joining the STSS to request a transfer in from a Public Sector Transfer Club scheme.

Where the member joins or re joins the STSS and has more than one consecutive pensionable employment, the 12 months time limit will apply from the commencement date of the first pensionable employment.

On receiving a transfer request, SPPA will send a 'Transfer In Application' letter to the member, which includes:

• a mandate which the member is required to sign which gives SPPA permission to deal with the former provider;
• personal details from the member such as marital status and contact numbers;
• details of all pensions that the member wishes to transfer and contact details of the former providers.

The member is required to return the Transfer In application forms to SPPA who will request a transfer value from the former provider. Non club transfers can be complex as former providers may issue a 3 month guarantee from the date of their calculation.

When SPPA has all the relevant information a transfer in value is calculated and an estimate provided to the member along with options forms asking them if they wish to go ahead with the transfer in. The member must make a decision and is recommended to consult an Independent Financial Adviser (IFA) and/or Staff Benefits representative before returning the options forms.

If the transfer in is to go ahead SPPA then request payment from the former pension provider before the end of the guarantee date. This is a very tight schedule to meet within 3 months and in some cases pension providers will only allow one calculation each 12 months. If the guarantee date is not met then the member would then need to wait a further 12 months and the calculation would then be based on their current salary which would not be beneficial to the member.

When a payment is made by the former provider an award calculation is processed by SPPA, who will then send a letter to the member confirming the pensionable service credit and confirmation that the transfer is now completed.

For transfers from a Non-Club scheme, calculations are based on the member's age, gender and salary at start date. A test is undertaken by SPPA to ensure the GMP is not more than the transfer value.

Qualifying Recognised Overseas Pension Schemes (QROPS)

A member has 12 months from joining or re joining the STSS to request a transfer in from a QROPS.

Where the member joins or re joins the STSS and has more than one consecutive pensionable employment, the 12 months time limit will apply from the commencement date of the first pensionable employment.

On receiving a transfer request, SPPA will send a Transfer In Application letter to the member, which includes:

• a mandate which the member is required to sign which gives SPPA permission to deal with the former provider;
• personal details from the member such as marital status and contact numbers;
• details of all pensions that the member wishes to transfer and contact details of the former providers.

The member is required to return the Transfer In application forms to SPPA who then request a transfer value from the former provider. QROPS transfers can be complex as former providers may issue a 3 month guarantee from the date of their calculation.

When SPPA has all the relevant information a transfer in value is calculated and an estimate provided to the member along with options forms asking them if they wish to go ahead with the transfer in. The member must make a decision and is recommended to consult an IFA and/or Staff Benefits representative before returning the options forms.

If the transfer in is to go ahead SPPA then request payment from the former pension provider before the end of the guarantee date. This is a very tight schedule to meet within 3 months and in some cases pension providers will only allow one calculation each 12 months. If the guarantee date is not met then the member would then need to wait a further 12 months and the calculation would then be based on their current salary which would not be beneficial to the member.

When a payment is made by the former provider an award calculation is processed by SPPA, who will then send a letter to the member confirming the pensionable service credit and confirmation that the transfer is now completed.

For transfers from a QROPS, calculations are based on the member's age, gender and salary at start date. A test is undertaken by SPPA to ensure the GMP is not more than the transfer value.

Joining the STSS

A member must request a transfer of pension benefits from their former pension provider within 12 months of joining the scheme and be under age 60 at the time the request is made. If the transfer in is from NPA 60 out with Scotland and the member is in the NPA 60 in Scotland then this transfer credit will usually be on a like for like basis.

If the member joined the STSS on or after 1st April 2007 the member must request a transfer within 12 months of joining the scheme and be under age 65 at the time the request is made. If the transfer in is from NPA 65 Teachers' scheme out with Scotland and the member is in NPA 65 in Scotland then this transfer credit will usually be on a like for like basis.

If the transfer is from a scheme which has a different NPA then the service credit will not result in a like for like transfer in. In such cases an estimate will be sent to the member seeking permission to progress with the transfer in.

If the member is approaching their normal pension age it is important that SPPA receive the transfer details before the member reaches normal pension age; the transfer cannot be completed if the member is over normal pension age at the time the request is made.

If the member has not previously been a member of the STSS, they will receive an 'Options on Joining' letter from SPPA. This letter will ask them if they have any pensions from former providers that they wish to transfer in to STSS.

The Options form must be completed and returned to SPPA within 12 months of joining the scheme. Alternatively the member can write to SPPA to request a transfer in, stating the name of their former pension provider. This must be done within 12 months of joining the STSS scheme.

Re joining the STSS

If a member is approaching their NPA it is important that SPPA receives the transfer details before the member reaches NPA; the transfer cannot be completed if the member is over NPA at the time the request is made.

If the transfer in request is from another non Teachers Occupational Pension Scheme and is not covered under the Club, Non Club or QROPS schemes and is not completed within 12 months of joining to STSS, SPPA will base any calculations on age, salary and factors provided by the Scheme Actuary on the date payment is received. However, consideration will be given where SPPA is responsible for any delays in the transfer process.

If the transfer in request does not meet the time limits, the request will not be accepted. However, if it is confirmed that the member has been denied access to, or information about the STSS, then exceptionally, SPPA may be able to allow a late request. SPPA will check with the employer to ensure that the member was issued with a Guide to the Scheme when they commenced employment.

There is provision in the Regulations for SPPA to allow discretion on behalf of the Scottish Ministers to extend the time limits, but this can only be used in exceptional circumstances.

In the case of former pensions running concurrently alongside the members STSS employment, SPPA may be able to accept the transfer even though the request may now be outside the 12 month time limit depending on the dates of the concurrent employment and the type of scheme they were in.

Guaranteed Minimum Pension (GMP) Liability

GMP liability means that a scheme must guarantee to pay a pension at least equal to, or greater than, that the member would have received had they been contributing to the State Second Pension (S2P).

If the former scheme was 'Contracted Out' of S2P the STSS will accept their liability for the GMP. However, if the scheme was Non Club, SPPA will undertake a test to ensure that the transfer in offered is more than the annual GMP liability with the former scheme. SPPA cannot accept the transfer in if it is not.

Issues Affecting the Membership Credit

Employee's transferring in may find that the membership credit in the STSS bears no resemblance to the membership in their former scheme because of the difference in benefits payable by the STSS. The most common reasons for reduced membership credits on transferring are:

• where a female member's previous pension scheme did not provide widower's cover entitlement on all previous membership;
• where any period of previous membership provided for a lesser lump sum than the 3/80 given by STSS for members with an NPA 60;
• where the previous pension scheme made retirement benefits payable at a normal pension age later than the STSS.

Member Leaves / Opts Out Before the Transfer In is Complete

If payment has been received prior to the member leaving or opting out of STSS employment, the transfer in will continue. If the transfer in is at the estimate stage at the time of the member leaving, the member can choose to continue with the transfer, however, if the member is opting out of the STSS the transfer in will be cancelled.

Interest

If a transfer in is not paid by the previous pension scheme provider within 6 months of the member's request, the former scheme is liable for payment of interest and should include this with the transfer payment. Any interest will be excluded from the transfer in value from a 'Club' scheme but will be treated as part of the transfer value where the transfer is from a 'Non-Club' or QROPS scheme.

Types of Transfer Out of the STSS

There are different types of pension schemes that can be transferred out of the STSS. These are as follows:

Teachers Schemes out with Scotland

If a member has been working for an employer superannuated by the STSS they may wish to transfer these benefits to the Teachers' Schemes for England & Wales, Northern Ireland or Isle of Man.

Public Sector Transfer Club

These are public and private sector occupational pension schemes, like the STSS who are all members of the Public Sector Transfer Club, also known as "the Club". Other examples of Club schemes are the Local Government Pension Scheme, Civil Service Pension Scheme and NHS Pension Scheme. All schemes within the 'Club' calculate transfer values based on standard factor tables and guidance provided by the Scheme Actuary.

Non Public Sector Transfer Club

Any pension providers who are not employee's of the 'Club', are known as 'Non Club Schemes' and include other occupational pension schemes, Section 32 Buy Out policies, personal pensions administered by insurance companies, banks etc. and contracted out/in money purchase schemes.

Qualifying Recognised Overseas Pension Schemes (QROPS)

SPPA can only consider a transfer to an overseas pension scheme which is classed as a Qualifying Recognised Overseas Pension Scheme, approval for which is granted by HMRC. HMRC will issue the scheme with an acceptance letter, a copy of which must be provided before any request for an overseas transfer can be considered. Transfer in payments must be made in Pounds Sterling for non EEC countries. Euros are acceptable for EEC employees.

Time Limits & Procedures for Transferring Out

There are specific time limits for requesting a transfer out of the STSS depending on the type of the new pension scheme.

Teachers' Pension Schemes out with Scotland

Where a member joined the scheme prior to 1 April 2015, with previous UK Teachers' Pension Scheme service. These members can transfer on day for day terms providing they have elected to transfer prior to 31 March 2017.

If the transfer out is to England, Wales or Northern Ireland SPPA will pay the transfer out value immediately using standard factor tables at the date the transfer out request was calculated. The receiving scheme credits the member with exactly the same period of membership.

SPPA will notify the receiving scheme of the membership being transferred out by sending them a membership statement. SPPA will also send the receiving scheme copies of any continuing elections to purchase additional pension (AP) or additional voluntary contributions (AVCs).

If the transfer out is to the Isle of Man, the receiving scheme will receive a transfer out value quote, together with a membership statement and copies of any continuing contracts to purchase additional pension (AP), or Additional Voluntary Contributions (AVCs). If a request for payment is received via the option form within the 3 month guarantee period, SPPA will pay the guaranteed amount shown on the provisional letter. If it is received outside the 3 month guarantee period SPPA recalculate the transfer out value at the date the request for payment was received and pay that amount to the new scheme.

Public Sector Transfer Club

If a member has at least 2 years scheme membership they can apply for a transfer out at any time before their NPA. Employees should note that although SPPA has no time limits for transferring out benefits, their new provider may have time limits to transfer benefits into their scheme.

If a member has less than 2 years scheme membership they must join their new pension scheme within 12 months of leaving the STSS and must apply for a transfer within 12 months of joining their new scheme.

SPPA will try to meet any request for a transfer out but would expect an application to be received no later than 6 months prior to the employee's normal retirement age.

Non Public Sector Transfer Club

If a member has at least 2 years scheme membership they can apply for a transfer out at any time before their NPA. Employees should note that although SPPA has no time limits for transferring out benefits, their new provider may have time limits to transfer benefits into their scheme.

If a member has less than 2 years scheme membership they musts join their new pension scheme within 12 months of leaving the STSS and must apply for a transfer within 12 months of joining their new scheme.

SPPA will try to meet any request for a transfer out but would expect an application to be received no later than 6 months prior to the employee's normal retirement age.

Qualifying Recognised Overseas Pension Schemes (QROPS)

If a member has at least 2 years scheme membership they can apply for a transfer out at any time before their NPA. Employees should note that although SPPA has no time limits for transferring out benefits, their new provider may have time limits to transfer benefits into their scheme.

If a member has less than 2 years scheme membership they must join their new pension scheme within 12 months of leaving the STSS and must apply for a transfer within 12 months of joining their new scheme.

SPPA will try to meet any request for a transfer out but would expect an application to be received no later than 6 months prior to the employee's NPA.

Application for Transfer Out

A transfer out application should be received from the new pension arrangement / provider. This gives SPPA important information about the scheme the benefits are transferring to, as well as confirming that the scheme is able to accept transfers from the STSS. If the STSS employer has not informed SPPA that the member has left the STSS, SPPA will contact them accordingly. SPPA will request leaver details as well as the pensionable pay to be used in the calculation of the transfer out value.

If the member has scheme membership prior to 6th April 1997 SPPA will also need to write to HMRC for the Guaranteed Minimum Pension (GMP) figure if this is not already held, as this forms part of the transfer out value calculation.

Transfer Out Process

When all required information has been received, SPPA calculate the transfer out value by converting the value of the member's pension rights to a current cash equivalent value in accordance with the STSS Regulations, using factors and guidance provided by the Scheme Actuary. After calculating the member's benefit entitlement, (including any additional benefits purchased), STSS will take account of any cost of living increases, any guaranteed minimum pension (GMP) liability, and any adjustment for market conditions (AMC) at the time of the transfer calculation. The AMC changes each month and is calculated at the beginning of each month from the figure published in the Financial Times.

Pensions increases are applied to the transfer out value to take account of any changes in the 'cost of living' from the date the member left the STSS to the date the transfer out value is calculated.

Details of the provisional transfer out value are sent to the new scheme with an options form – this is a discharge form that must be completed by the member and their new scheme if they wish the transfer out to proceed. The transfer out value is guaranteed for 3 months in accordance with the Pensions Act 1995.

If the option form is returned within 3 months, SPPA will pay the provisional amount quoted on the estimate. If the option form is returned outside the 3-month guarantee period SPPA will recalculate the transfer out value and pay the new amount to the receiving scheme.

Free Standing AVC

If SPPA records show that the member has a FSAVC SPPA will notify the FSAVC provider of any transfer of benefits to a new pension scheme.

Hypothetical Transfer Values

A hypothetical transfer value, for information only, can be sought but cannot be guaranteed. A member is only entitled to one free hypothetical transfer value per 12-month period, however, any additional requests can be provided at a charge of £200 plus VAT. Hypothetical transfer values must not be used for divorce purposes. STSS will provide details of the transfer out value but no discharge forms.