Teachers Pension

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short_of_a_shilling! wrote:

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??

Not sure where you have got this idea from. I believe the independent sector makes the same contributions to the TPS as local authorities. You should enquire further.

I remember independent school fees went up by 9/10% in the year that employer contribution rates to teachers' pensions were last raised.

I note that the new Teacher scheme requires part time teachers to opt out. Before they had to opt in. Perhaps you just never asked?

short_of_a_shilling! wrote:

Also, what is an AVC and how does it work?

It's just a wrapper for saving a pension pot.

The Teachers AVC is with the Prudential With Profits Fund that has 1% charges and has done quite well as far as with profit funds go. The 1% charges were an attraction in the early days but now they are not so far from the norm - so it might be worth looking at other funds.

You pay in 78p. The government adds 22p tax relief. The fund grows over time.

When you retire your pot is used to buy an annuity.

A recent reform allowed your AVC pot to produce a tax free lump sum of 25% on retirement .

The rest is given to an insurance company in return for an annuity (a guaranteed income until you pop your clogs.

Be warned - with increased longevity, annuity rates can be low.

short_of_a_shilling!

Ooooo should have explained, :embarasse I am self employed in the independent sector - paid direct by parents for additional support within the school day. So, no holiday, sick or pension. :sad:

This is the system the school has used for years and it suits them a treat 'don't get me started' because the poor parents pay twice, first the school and then me ~ but that is a different story. The price you pay for having a child with specific learning difficulties!! Sadly I love my job and the kids are great so despite the ridiculous employment situation I don't want to leave .

Anyway back to pensions. Thanks for the info everyone I am really grateful.

A_Nice_Englishman

short_of_a_shilling! wrote:

Ooooo should have explained, :embarasse I am self employed in the independent sector - paid direct by parents for additional support within the school day. So, no holiday, sick or pension. :sad:

You should really factor these into your charges. If the work you are doing is the same shouldn't you get paid the same (including pension/holiday/sick)?

dunstonh

If you are self employed, it is worth noting that you dont get the second state pension (used to be called SERPS). I know its off topic but it does mean you will be around £5k a year worse off.

clairehi

short_of_a_shilling! wrote:

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:

You wont be able to buy added years after Jan. 1st so you will have to move lightning fast if you want to go down this road. After Jan 1st there will be new provisions to increase your pension by up to £5000 per annum, but its not explained how this will work on the website. This means that you cant really make an informed choice about what to do, which is not very helpful to you.

How much money in Premium Bonds are we talking here?

To help you decide whether added years are worth buying, there are tables on the TPS website which show you how much it would cost to buy them. At age 47, it will cost you 19.34% of your gross annual salary to buy one added year of service, as a lump sum. One added year will buy you a pension per year of 1/80th final salary.

You can thus make a rough estimate of how many years you would need to survive after retirement to start gaining from the added year of pension contributions.

(There are however other things you could do with your Premium Bond money to help provide for retirement.)

Whatever you decide, you should definitely join the scheme. The main question is whether to join before or after 1st January 2007. The new scheme would be better for you if you want to work until 65 and to build up contributions faster - 1/60th accrual rate as opposed to 1/80th in the new scheme.

If you joined the old scheme, by age 65 you would have a pension of 18/80th (0.225) final salary. In the new scheme, by age 65, you would have a pension of 18/60th (0.3) final salary.

short_of_a_shilling!

Thanks so much for the response.

How much money in Premium Bonds are we talking here? I am debt free and total life savings are £35,000. held in P Bonds, an isa and investment account.

My current salary would be £30,000. per year if I were employed in the state sector full time but because I work part time I only earn .1 of that. I hope to increase my hours and my income on the pay spine but I really don't want to leave my job in the independent sector (self employed) and so my final state salary will probably never be very big. :undecided

The gross annual salary on the TPS website refers to money earned in the state sector I assume, so other earnings will not count. :doh:

I have the paperwork being processed at the moment with my county in case I decide to go ahead with the purchase but feel so rushed and confused. :sad:

Should I employ some ‘financial wiz’ to look at my exact personal situation and educate me a bit??? :kisses3:

Backbiter

dunstonh wrote:

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.



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.



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.



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.

Thanks for your replies, and apologies for the snipe at financial advice which may well have been absolutely spot on, but which appeared to conflict with more recent advice, which you have stated - plausibly - to be incorrect.

I was fully aware of the tax advantages of of AVCs (in my case FSAVCs), but hadn't considered the downside of buying past years (no employer contributions). Looking at the figures quoted above regarding the cost of buying past years, my AVC fund would barely cover a single year anyway, so I'll stick with it.

clairehi

short_of_a_shilling! wrote:

Should I employ some ‘financial wiz’ to look at my exact personal situation and educate me a bit??? :kisses3:

For general help you could try the Pensions Advisory Service who I have found to be very helpful.

If you are only earning £3K pensionable income per annum, your pension from the TPS is going to be tiny. Think about it - the maximum pension on retirement in the current scheme is 0.5 final salary so even if you bought the maximum number of added years it would still only be £1.5K a year.

In value for money terms it is still worth joining from now onwards, but as I said before you need to do the sums Ive suggested to work out whether you would get your money back from buying added years at this point.

Have you worked out how much money you will need to live on in retirement. You should also get a state pension forecast. The difference betwen the two tells you what you are aiming to save towards.