Pension v No Pension

iQueen

I really need some good advice!

I am almost 61 and began working as a teacher 22 months ago after raising my children. Currently I am paying just over £100 a month into the teachers' pension - I work fulltime in a state school.

Because of my lone-parenting responsibilities, my previous employment has been negligible. The last qoutation of my state pension was £59 pw. I have no claim on my ex husbands' pensions.

When I started working, I sought advice from an IFA, who recommended that I ditch the teachers pension. Assuming I work until I am 65,the reason was: I shall not receive enough combined pension to keep me off benefits.

I could use the increased income (less tax!) to pay off some of my £38k mortgage, which is covered by 2 underperforming endowments, and improve my home, by installing double glazing and central heating, for my twilight years.

One more fly in the ointment: I work away from home (paying for lodgings) because I have not yet been able to secure a post locally. I am on a permanent, full-time contract.

No savings - just a buffer of circa £2k, but NO other debts!

Any advice would be most welcome! Pleeeease!

dunstonh

When I started working, I sought advice from an IFA, who recommended that I ditch the teachers pension. Assuming I work until I am 65,the reason was: I shall not receive enough combined pension to keep me off benefits.

Seems logical.

iQueen

It does seem to make sense, but if I withdraw from the scheme, I will forego the lump sum due on retirement - not an enormous amount, according to online calculators.

All I want is a SECURE, if impoverished old age!

EdInvestor

Are you using your state pension money to reduce your mortgage?

Post some info about the endowments so we can see what to do about them.It's no longer necessarily the right thing to keep endowments to maturity.

Providers
Guaranteed sum assured
Declared bonuses
Surrender values ( ring up and ask)
Monthly premiums
Maturity dates

dunstonh

You will qualify for pension credit based on your low income in retirement. However, every penny you earn will reduce the pension credit down and any savings above £6000 will reduce it further as well. The rate of reduction is higher than the interest you can receive on savings accounts at this time (£1 p.w. for every £500 over £6000).

Unless the lump sum is signficant, then it wouldnt be worth it. Its a case of working out how much lump sum you are likely to get versus how much it has cost you in contributions and how much you will lose in pension credit.

iQueen

Thank you for taking the time to advise me, all of you.

The lump sum is likely to be less than £3k, unless I am promoted. It is based on the basic teaching salary which increases each year.

I'll have to get back to you with all the info you require, because I'm not at home at present.

BTW, I have not started claiming my state pension yet. Is there any real advantage in NOT doing so? Will I pay tax on it, if I do start to claim it? Does not claiming it increase its future value significantly?