Teachers Pension - do I volunteer for redundancy?

blueflyingtonight

I am a 55 year old teacher and there is a chance that I could volunteer for redundancy. My employer has said that I could retire on grounds of redundancy and they will make up the loss that I would otherwise suffer due to retiring 5 years early. (i.e. no actuarial reduction).

Advantages:

Get to retire early!
No actuarial reduction
This type of severance package is unlikely to be offered in the future.
Could get a part time job to top up the pension

Disadvantages:

My pension is just over one third of my current salary
No more contributions hence my pension & lump sum will be smaller even without actuarial reduction.

Is there anything else I haven't considered? I am sorely tempted!!

atush

I would be too.

What is supply teaching like in your area? Every teacher I know who retired at 55 did supply teaching after.

hugheskevi

Remember to compare like-with-like...the pension will not have any National Insurance contributions deducted, nor any pension contributions, so although it might only be a third of the wage, the net take-home amount might be more like a half.

Starship9

I was offered a similar deal in early Summer last year, though I was only 51. I had 33 years service in the Civil Service and the deal was that I offered my compensation towards the cost of paying off the Act. Reduction and the employer would make up the rest. My contribution was treated as untaxed for this purpose. My pension was then 45% of my gross income at retirement ( CPI linked ) and I received a tax free lump sum of just over £50K.

As we had paid our mortgage off the previous year, had modest outgoings, and I fancied a change, I jumped at this. I've not regretted it one bit, so far.

Supplementing income through paid work is tough in this economic climate but we can live off the reduced income and have the capital to play with if needed.

The sense of freedom from being liberated from the burden of work has to be felt to be believed

If you can make the figures add up for you, my advice is to go for it.

KMK

Getting to retire early without actuarial reduction must be almost unheard of now in teaching, so don't underestimate that! Clearly you will have to look carefully at your financial circumstances, but if you can go early, I don't think you will regret it.

I taught for 38 years , sometimes in very challenging situations and it was only when I retired that I realized how much stress I had been under. My final post was as deputy head in a large comprehensive. I feel completely liberated now and do not miss teaching at all, so it was the right time for me to go. Having the freedom and time to do what I want is just wonderful. I did not need to work after retiring so never did supply work, but it must be available out there if you want it.

You save on petrol, clothes etc when you stop work but the most important thing for me is the the liberation from the daily routine. Nothing beats waking up each morning , knowing you can do as much or as little as you want. It's the small things that really matter: leisurely breakfasts, reading the paper in the morning (instead of late at night), shopping mid week when all is quiet, holidays in term time, having time to read for pleasure, no feeling of dread on Sunday evenings,etc.

I would think long and hard before turning this deal down; some teachers would give their eye teeth for such an offer!

kidmugsy

hugheskevi wrote: »

Remember to compare like-with-like...the pension will not have any National Insurance contributions deducted, nor any pension contributions, so although it might only be a third of the wage, the net take-home amount might be more like a half.

Yes, and income tax will take a smaller proportion too.

maginot

Take it, take it, take it!!! Then run as fast as you can!

jem16

KMK wrote: »

I would think long and hard before turning this deal down; some teachers would give their eye teeth for such an offer!

Very true! I'm one of them.

My friend and colleague retired at age 56 two years ago with no actuarial reducation and a one year enhancement.

Two years on she has never regretted it even for one second.

blueflyingtonight

OK - you have convinced me! I just need to convince the governors at my school that it will be in the school's best interest to accept my request for voluntary redundancy. Here's hoping!

Steve

blueflyingtonight

Further question - is pension taxed in the same way as any other income or is it taxed at a lower rate?

Cheers

Steve

Bigmoney2

Tax is the same as other income i.e. 20% after personal allowance (currently 7464 rising to 8105 in April) . Remember there wil be no NI or pension deductions, but if you get another job (supply teaching for example) you will have already used your personal allowance so will pay tax on all of it, plus NI.