Who can receive a refund of pension contributions?
When you take up a teaching post in Scotland, you’re automatically enrolled in the Teachers’ pension scheme and personal contributions to your pension are taken from your salary.
However, if you leave pensionable employment in Scotland or choose to opt out of the scheme, you may be able to apply for a refund of the contributions you’ve paid as long as you haven’t already qualified to receive benefits from the scheme.
If you’re eligible and you have a valid National Insurance number, a refund can be made and your rights within the pension scheme will be cancelled.
In most cases, you can only apply for a refund if your period of pensionable employment is less than two calendar years.
In some rare cases, if you served less than five years’ pensionable employment before 6th April 1988, you may still be entitled to a refund.
Note that these time frames refer to the calendar period not to the number days you actually worked. This is a particularly important point for part-time members because although pension benefits are based on the number of days you actually work, the qualifying period is always based on calendar years.
Leaving or opting out with less than three months’ service
If you leave your job or choose to opt out of the pension scheme within three months of your start date, your only option is a refund of contributions. This will be arranged by your employer.
Leaving or opting out with between three months’ and two years’ service
If you leave or opt out when you’ve spent more than three months in the scheme but less than two years, you have a number of options. You can:
- apply for a refund of contributions (which will be paid less certain deductions)
- transfer your benefits to another public service pension scheme
- defer taking a refund until you’ve decided on your future intentions (for example, returning to Teaching in Scotland at a future date or rejoining the scheme within 5 years).
If you don’t apply for a refund of contributions and you don’t return to pensionable employment within 5 years, SPPA will contact you to organise the payment of your refund.
Deductions from refunds
If you’re due a refund, certain deductions will be made before it’s paid.
Members who receive a refund of contributions made between 6th April 1978 and 5th April 2016 will have an amount deducted for their share of what is known as the ‘Contributions Equivalent Premium’. It represents the additional National Insurance Contributions which would have been paid to the State scheme to secure their entitlement to ‘State Second Pension’
Income tax is also deducted from all refunds at the standard rate after the deduction of any Contributions Equivalent Premium required has been made. The income tax deduction covers the tax relief which was given at the time the pension contributions were originally paid.
Interest on delayed refunds
Although interest is not payable in the financial year that you leave or opt out of the scheme, it is paid on subsequent years that a refund is held on your behalf. Compound interest is paid at a rate of 3% per annum and is calculated up to the day before the refund is paid.
Re-employment after full or partial retirement
If you return to working as a teacher after you’ve started taking benefits from your Scottish Teachers’ pension scheme, you can’t apply for a refund of any contributions you make during re-employment. This is due to HMRC regulations introduced in 2006 which stipulate that a refund can only be paid if it extinguishes the member’s entitlement to benefits under the pension scheme. Naturally, this presents a problem for re-employed pensioners as a repayment of post-retirement contributions can’t be allowed to extinguish the member's right to the pension they have in payment.
As an alternative to refund, we now pay a Short Service Annuity to any member who has a period of re-employment that’s less than one calendar year. This type of annuity is payable for life and ceases payment on the death of the member. If your re-employment is for one year or you'll be entitled to a second pension which can be claimed in the same way as your original pension.
Applying for a refund
Opting out: If you’re opting out of the Scottish Teachers’ Pension Scheme 2015 but continuing to work as a teacher in Scotland, you need to complete the relevant section on the opt out form to request a refund of contributions.
Leaving teaching: If you’re leaving your post as a teacher in Scotland, you can request a refund of contributions by completing the refund application form.
‘Frozen’ refunds: If you’re applying for a refund of contributions made to one of the sections of the Scottish Teachers’ Superannuation Scheme in the past, use the refund application form.
If at any time you want to change any of the information you’ve given with your application (such as your home address or bank details) contact us as soon as possible to prevent any delays in you receiving payment.
Refund payments can only be made when the period of one month has elapsed since you either terminated employment or opted out of the pension scheme.
In some cases, SPPA may need to obtain information from your employer and/or HMRC before your refund payment can be made. Refunds are normally made within a month of all relevant information being received.
Occasionally, a refund can be overpaid – perhaps due to us receiving amended information from your employer. If this happens, we’re required to reclaim any overpaid sums to prevent a loss being made by the Agency.