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  • FIRST POST
    • frugal90
    • By frugal90 18th Mar 17, 7:02 PM
    • 224Posts
    • 108Thanks
    frugal90
    Buying additional teachers pension- what would you do?
    • #1
    • 18th Mar 17, 7:02 PM
    Buying additional teachers pension- what would you do? 18th Mar 17 at 7:02 PM
    I have accrued an ISA holding of £100k, mostly income paying investment trusts, like City of London IT etc.
    I have the possibility of buying additional teachers pension.
    £3000 per year, which would cost me, £53880 with dependant benefits, i.e. half when I die, after tax this would give me £200 per month index linked from age 60. I am currently 55 and am planning to stop when 56. We have the four years covered with Sipp and cash.
    Wife is 6 years younger and we are both in good health. Would you take this deal or not?
Page 1
    • kidmugsy
    • By kidmugsy 18th Mar 17, 10:19 PM
    • 9,623 Posts
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    kidmugsy
    • #2
    • 18th Mar 17, 10:19 PM
    • #2
    • 18th Mar 17, 10:19 PM
    Are you planning to draw the pension from 56 or 60?

    If 60 I'd think an index-linked annuity return in the neighbourhood of 6% p.a. is pretty good. Is it index-linked from date of purchase?
    • mgdavid
    • By mgdavid 19th Mar 17, 12:20 AM
    • 5,204 Posts
    • 4,368 Thanks
    mgdavid
    • #3
    • 19th Mar 17, 12:20 AM
    • #3
    • 19th Mar 17, 12:20 AM
    Have you worked out your required income in retirement?
    What's your current planned total income in retirement?
    If the former is less than the latter what would you do with the extra money?
    Most early retirees expect to spend more in the early years than later due to being healthier, fitter and more active so would not having the 50-odd grand leave you short of capital to enjoy?
    A salary slave no more.....
    • kidmugsy
    • By kidmugsy 19th Mar 17, 1:49 AM
    • 9,623 Posts
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    kidmugsy
    • #4
    • 19th Mar 17, 1:49 AM
    • #4
    • 19th Mar 17, 1:49 AM
    Most early retirees expect to spend more in the early years than later due to being healthier, fitter and more active so would not having the 50-odd grand leave you short of capital to enjoy?
    Originally posted by mgdavid
    True, but have they remembered that as they age they'll have to hire people to decorate, repair, and modify the house, do the heavy digging, help with the cleaning, and so forth?
    • kidmugsy
    • By kidmugsy 19th Mar 17, 1:57 AM
    • 9,623 Posts
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    kidmugsy
    • #5
    • 19th Mar 17, 1:57 AM
    • #5
    • 19th Mar 17, 1:57 AM
    What do you look on as the principal competitor for this lump of capital? More pension contributions for your wife, perhaps, or leaving it in your ISAs, or spending it to bridge the gap until your State Pensions begin?

    Since bonds look to be rotten value, diversifying your £100k between equities and annuities (which this effectively is) might be sensible.
    • frugal90
    • By frugal90 19th Mar 17, 6:20 AM
    • 224 Posts
    • 108 Thanks
    frugal90
    • #6
    • 19th Mar 17, 6:20 AM
    • #6
    • 19th Mar 17, 6:20 AM
    Required income £35k per year which we will have. Won't take teachers pen until 60. 4 year gap covered. I am tempted to keep it in equitiesv and drawdown the income when we need it for special trips and gradually run down the capital. Will by extra Nat insurance years to ensure full state/ pen when that comes along. I suppose nice to have the problem really.
    • chucknorris
    • By chucknorris 19th Mar 17, 6:38 AM
    • 9,099 Posts
    • 13,742 Thanks
    chucknorris
    • #7
    • 19th Mar 17, 6:38 AM
    • #7
    • 19th Mar 17, 6:38 AM
    I have accrued an ISA holding of £100k, mostly income paying investment trusts, like City of London IT etc.
    I have the possibility of buying additional teachers pension.
    £3000 per year, which would cost me, £53880 with dependant benefits, i.e. half when I die, after tax this would give me £200 per month index linked from age 60. I am currently 55 and am planning to stop when 56. We have the four years covered with Sipp and cash.
    Wife is 6 years younger and we are both in good health. Would you take this deal or not?
    Originally posted by frugal90
    Buying additional pension in the TPS is great value, I've already bought the max allowed (about £6,100) in the (pre 2015) TPS. I join the new TPS in August 2020, at which point I can start buying additional pension again, which I will. In fact, I will buy as much as I possibly can before I retire, which will probably only be approx £2,500 as I have dropped down to working one day per week, so my relevant income isn't that much, and I will only have 4 years before reaching my state pension age after joining the new TPS.

    Although the TPS additional pension is great value, I do have plenty capital outside of the TPS, so retaining accessible capital isn't a factor that I have to consider, I can invest purely on value.
    Last edited by chucknorris; 19-03-2017 at 7:30 AM.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

    For the avoidance of doubt Chuck Norris is an actor and an ex martial artist (not me)
    • OldBeanz
    • By OldBeanz 19th Mar 17, 7:50 AM
    • 674 Posts
    • 507 Thanks
    OldBeanz
    • #8
    • 19th Mar 17, 7:50 AM
    • #8
    • 19th Mar 17, 7:50 AM
    Required income £35k per year which we will have. Won't take teachers pen until 60. 4 year gap covered. I am tempted to keep it in equitiesv and drawdown the income when we need it for special trips and gradually run down the capital. Will by extra Nat insurance years to ensure full state/ pen when that comes along. I suppose nice to have the problem really.
    Originally posted by frugal90
    You also need to consider the income of your partner if you pre-decease her. Will she be able to fund the house and a decent lifestyle or will she need to downgrade? You could also ensure that she is able to draw the maximum from a pension from 55 I.e. £12.5k + 25% = £16.6k pa. So if she earns £33k you could feed the £100k into her pension over the next 25 months giving you a 25% tax free bonus draw able when she hits 55.
    • frugal90
    • By frugal90 19th Mar 17, 12:44 PM
    • 224 Posts
    • 108 Thanks
    frugal90
    • #9
    • 19th Mar 17, 12:44 PM
    • #9
    • 19th Mar 17, 12:44 PM
    spouse also has a SIPP of £80 K to cover from 55 to 60, so got that covered.
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