Opting out of teachers pension. Confused!

Cobweb18

I am currently in teachers pension, paying in £350 a month, however, I won't be able to draw on this until I am 68! I have used a mortgage over-payment calculator and if I were to overpay by £350 per month, it would be paid off 11 years earlier. This means it could be clear by the time I am 53 (15 years ahead of teachers pension money). As my partner and I plan to buy a second property together soon, the flat would be rented out and so give me an additional income of around £800 per month from the age of 53, does this make sense! I am really thinking of going for it, any advice? I'm muddled!

jem16

Cobweb18 wrote: »

I am currently in teachers pension, paying in £350 a month, however, I won't be able to draw on this until I am 68!

You don't have to wait until age 68 to draw it. You can access your pension from age 55 but with an actuarial reduction.

I have used a mortgage over-payment calculator and if I were to overpay by £350 per month, it would be paid off 11 years earlier.

It won't be £350 though if you don't pay it into your pension as you get tax relief on this plus, at the moment, a lower NI rate.

As my partner and I plan to buy a second property together soon, the flat would be rented out and so give me an additional income of around £800 per month from the age of 53,

What happens when you don't have tenants? Are you prepared to manage a property?

does this make sense! I am really thinking of going for it, any advice? I'm muddled!

You will lose far more by opting out than you will gain. Perhaps you should rework the figures using around £275 and then also calculate what pension you would get by leaving at age 55.

warwicktiger

Get some serious independent financial advice, pay for a consultation if need be, the public sector pension schemes are excellent value.

dunstonh

I have used a mortgage over-payment calculator and if I were to overpay by £350 per month, it would be paid off 11 years earlier.

Which is nice but you wont be saving £350pm by opting out as you will have to pay tax and NI on the extra income. Plus, it would be false economy on a massive scale. It would rank as one of the worst financial decisions of your life.

As my partner and I plan to buy a second property together soon, the flat would be rented out and so give me an additional income of around £800 per month from the age of 53, does this make sense!

Again, very nice but the teachers pension wipes the floor with it. It would be a bad move.

I am really thinking of going for it, any advice?

You would be saving the taxpayer a fortune. So, in that respect, you should go with it. However, personally, it would be a really silly thing to do financially.

lvader

Go for it! The more the merrier.:beer:

Cobweb18

Okay dokay, so everyone is saying NO! However, teacher's pensions have been altered so much that I won't be eligible for a cash lump sum and the payments are creeping up each year and eligibility age has risen to 68, cashing in sooner (if an option) would reduce it significantly. What about switching to a private pension such as offered by Virgin?

OldBeanz

No, no and thrice no.

jem16

Cobweb18 wrote: »

Okay dokay, so everyone is saying NO! However, teacher's pensions have been altered so much that I won't be eligible for a cash lump sum and the payments are creeping up each year and eligibility age has risen to 68,

You can still have a cash lump sum by commuting part of your pension but you're actually better off not being given an automatic lump sum as the commutation rate is dire at 12:1. Think yourself lucky!

cashing in sooner (if an option) would reduce it significantly.

Yes but still far better than the options you have so far come up with.

What about switching to a private pension such as offered by Virgin?

That's even worse than your first suggestion! It's one of the worst performing pensions available on the market. How do you plan to make up the loss of the employer's contribution of around 15.6% by paying into any personal pension? You're also giving up the most valuable part of it being defined benefit and that is it's guaranteed with no risk to you.

Where on earth are you getting these ridiculous ideas?

Cobweb18

Oh, I thought I'd hit upon a great idea but maybe not (I'm an English teacher, not maths!) However, 68 to wait for a pension. Any suggestions on how I can stay in teachers pension but stop working sooner?!

jem16

Cobweb18 wrote: »

Oh, I thought I'd hit upon a great idea but maybe not (I'm an English teacher, not maths!) However, 68 to wait for a pension.

Have you actually worked out the figures of taking it early at say age 60?

Any suggestions on how I can stay in teachers pension but stop working sooner?!

You could still retire early and not take your Teachers' Pension until its normal retirement date. Plug the gap by building up savings in a S&S ISA.

What age are you and are you a basic rate taxpayer or higher rate?

When did you join the Teachers' pension scheme?

Cobweb18

Have you actually worked out the figures of taking it early at say age 60?

Nope, I need to do that.



You could still retire early and not take your Teachers' Pension until its normal retirement date. Plug the gap by building up savings in a S&S ISA.

Yes, maybe I should throw as much as I can into mortgage over-payments to try and clear it at least five years sooner?

What age are you and are you a basic rate taxpayer or higher rate?

I'm 41 and a higher rate tax payer.

When did you join the Teachers' pension scheme?[/QUOTE]

I have seven years in teachers pension, currently worth only about £5,000 per anun, not much.

Thank you, I feel like a bit of an idiot!