Teachers Pension -Additional Pension is it worth it?

Sam37

Hello,

I can't find more information on the Teachers Pension site, so I hoped someone here can help.

I initially opted out -to my great regret now- and now I am in the process of joining I can't buy any additional years (post 2007 rules), but can buy Additional Pension (I mean APB, not AVC which is with the Pru).

The only advantage I can see to the APB is that it is index linked and tax-protected, but I'd prefer to not tie this money to a pensions scheme, but rather keep in flexible in ISAs (and possibly index linked bonds in the future) I monitor myself for inflation etc.

Do I miss out by not paying APB but in ISAs etc instead? Would there be an advantage to the APB that I can't see?

Many thanks!

Sobraon

Additional pension modeller here. Other factors for me are tax relief, rpi linking from application, tax in retirement, benefits in retirement, cost and certainty.

To "use up" some 40% tax liability I have bought an additional £250 (£200 net, with dependents benefit) worth of additional pension over the last two years at £177 per month (24 x £106 net). Net cost is £2544 for £200 net pension (12.77:1). I think also there is a 5yr guarantee on the additional pension (but I am not sure).

I have a copy of the modeller on my pc and to keep things simple I have just worked out for a 59 yr old male (with dependents benefits) that for a gross lump sum cost of £5300 (net £3180 with 40% tax relief) a £250 additional pension is provided at 60. I see this as a "notional" annuity rate of 4.7%.

Also checked the FSA annuity tables and the best annuity rate available today for a 60 year old male (rpi linked, 5yr guarantee and 50% spousal pension ) would appear to be Canada Life at 2.54% (had to use a pension pot of 100K to tease this out).

On this basis I will take out another 2 year contract when my present one finishes in July.

HTH, Sobraon

baby_boomer

A teacher friend whose husband is an actuary tells me that the taxpayer is currently onto a loser with the teachers' additional pension.

But if you die, it's money lost to your estate which is not the case with an ISA or the Pru AVC, so it's not for everyone.

Sam37 wrote: »

The only advantage I can see to the APB is that it is index linked

Some private sector workers would kill for that advantage. It gives complete peace of mind. After all, who knows what the next 50 years will bring?

Probably a dilution of the additional teachers' pension scheme for starters, as the next government seeks to bring the public finances under control.

They could use the actuaries to do this - if they didn't want a public confrontation.

Sam37

Many thanks to both of you.

I notice I still think too much from the perspective of someone who can earn a salary, but of course the index linking keeps going after I stop being that.

The whole business of annuities and the type of conditions/rates attached to those is something I have not looked into enough. Of course difficult to see how the market would be in a few decades, although demographics are very likely to be an unfavorable factor then.

Think I'll become an additional burden to the taxpayer...