Teachers Pension

short_of_a_shilling!

The teachers pension scheme is changing from Jan 1st and I am horribly confused about what to do.

http://www.teacherspensions.co.uk/

I am a 47 year old teacher with absolutely NO pension provision at all. I teach kids with special needs and have only recently joined the state sector working part time.

If I act quickly I can buy back up to 20 years of pension with a lump sum. If I wait until after Jan 1, there maybe a better option. :idea:

Anything to do with numbers freezes my brain. I was that naughty kid who sat at the back and chatted her way through maths lessons.

I would love some advice from someone who actually understands all this stuff. :kisses3:
Thank you soooooooooo much.

ReportInvestor

short_of_a_shilling! wrote:

If I act quickly I can buy back up to 20 years of pension with a lump sum

Are you sure this option is available? It would involve a massive sum of money, way over your current annual salary.

Unfortunately many of the links on the TPS site aren't working and so there doesn't seem enough info re the case of part-time workers .

In general the TPS scheme is a very good one that people not in final salary schemes can only look on and envy.

I would recommend contributing to it, including in its new form.

They are increasing the employee's contribution (but also the employer's hefty wack).
They are going to allow a larger lump sum to be taken at retirement if you like (but you'll have to give up some pension benefit in lieu).
They are making a teacher's pension based on an average of the last 3 years salary rather than the final year's salary.
They are introducing some greater flexibility for teachers who want to gradually wind down (as long as they can get their employer's agreement).

short_of_a_shilling!

Thanks so much for taking time to reply.

I have also had problems with the web site links :cool: but there is a leaflet 374 which explains it a bit, I think
1. http://www.teacherspensions.co.uk/
2. Click on 'Further Information/Leaflets'
3. Scroll down to 'Maintaining and Boosting Your Pension'
4. Open 'Buying past added years (PAY) '

Because the lack of a pension has always worried me, I have managed to save quite a reasonable sum in :lipsrseal Premium Bonds (:money:not all they are cracked up to be) which I could turn back into cash to make the purchase if it seems like the way to go.
:rolleyes: :rolleyes: :rolleyes: :rolleyes:

the_optimist

A financial adviser told me a few months ago, that it is not worth buying back years as you would be paying in more than you would get. Don't know if he's right, though. Maybe somebody here knows?

Backbiter

I was told by a TPS expert that buying back years was the best thing you can do to boost your pension, and that if any adviser had told you otherwise and sold you another product like AVCs you could have them for misselling and claim compensation!
I looked into this and wanted to cash in my AVC fund and invest in past years - and was told it's against the rules!!
Classic financial advice all round. Just like my experiece with Endowments.
So I'm currently keeping my AVCs going and don't have the cash to buy back past years.

Prudent

the_optimist wrote:

A financial adviser told me a few months ago, that it is not worth buying back years as you would be paying in more than you would get. Don't know if he's right, though. Maybe somebody here knows?

I was told the same thing about two years ago by a financial adviser from my teaching union.

I am trying to remember the reasons given. I think they were:

1) The employer does not contribute in this case, so what you put in benefits you a lot less than paying in part of your monthly salary. I am in Scotland and pay 6%, my employer pays a further 6% in effect doubling the value of everything I put in. The scheme is only good because of the level contributed by the employer.

2) If you don't stay in teaching until retirement, putting extra into the scheme is a mistake because it is based on final salary.

3) you cannot take so much of it as a lump sum as you can with the rest of the pension.

I hope these are correct as its from memory. I was advised to take an additional low risk private pension. Actually I didn't do this as I decided to dedicate the spare cash to paying off my mortgage. Been thinking about it again recently though.

dunstonh

Buying of extra years is usually the most expensive option. However, over the long term it is also likely to result in the highest income if you stay to retirement age and have a career path that will result in pay increases.

I was told by a TPS expert that buying back years was the best thing you can do to boost your pension, and that if any adviser had told you otherwise and sold you another product like AVCs you could have them for misselling and claim compensation!

That is incorrect. AVCs and FSAVCs have other advantages which are not available in buying of added years. Both options have pros and cons and its a case of using the right one to suit your requirements. Prudent lists a few.

I looked into this and wanted to cash in my AVC fund and invest in past years - and was told it's against the rules!!

Of course it is. You got tax relief on the contributions. You dont think the Govt is going to let you draw those for another purpose.

Classic financial advice all round. Just like my experiece with Endowments.
So I'm currently keeping my AVCs going and don't have the cash to buy back past years.

Cant see anything wrong with the advice based on what you have said so far. Plus advisers dont often get involved with the setting up of AVCs. So your comments are misplaced.

ReportInvestor

Reply to Prudent

1) Correct - except your employer would have surely been adding 13.5%?

2) Yes to some extent - although the final salary you end up on is inflation linked (admittedly not as good as an earnings link).

3) Not correct (unless you are counting the effects of 1) )

Over the years the calculations for buying added years will no doubt have changes. I guess that they have become more expensive recently.
The calculation depends on your age and future promotion prospects.
The calculation also depends on your sex. It's women get more from buy ing added years because they tend to live longer but the calculations are the same for both sexes (unlike when you go to buy an annuity with an AVC pension fund).

jem16

ReportInvestor wrote:

Reply to Prudent

1) Correct - except your employer would have surely been adding 9%?

In Scotland the employer's contribution is 12.5% as of October 2003. In England it is 13.5%

As for buying back added years, I had advice from the EIS (teachers' union) Financial Services that buying back added years was expensive but better than AVCs.

I think it depends on when you elect to buy back years as the later you do it the more expensive it is.

Prudent

jem16 wrote:

In Scotland the employer's contribution is 12.5% as of October 2003. In England it is 13.5%

As for buying back added years, I had advice from the EIS (teachers' union) Financial Services that buying back added years was expensive but better than AVCs.

I think it depends on when you elect to buy back years as the later you do it the more expensive it is.

It was an EIS adviser I spoke to also. I guess they advise everyone according to their personal circumstances. I wasn't 100% I would stay in teaching until retirement at that point.

short_of_a_shilling!

Oh my goodness, more confused than ever lol. :doh:
I guess I will stay in teaching until retirement and hopefully I will increase my salary but, as a specialist teacher over half of my work is in the independent sector where there is no pension provision. :think: :think:
I hadn't considered the lack of the employers’ contribution ~ does this make it a bad idea??
Also, what is an AVC and how does it work? (really embarrassed by my own stupidity) :rolleyes2 :rolleyes2

Thanks you all for your comments. :T