Teachers Pension and buying additional years

fizio

Just trying to see if its worth my OH buying additional years of the teachers pension. The deal is approx £15k payment for £1k additional pension per year at NRA.
On the one hand life expectency points to this being a good deal but on the other hand inflation means it may not - though I think the TPS is index-linked so I assume the £1K will go worth more than £1K by the time its taken at NRA?
Given that my OH no longer works, I'm also wondering if this is a better deal than thinks like opening a SIPP to get 20% govt contribution or other options like ISA/VCT etc.
My instincts say this is a good idea given its pretty much risk free versus other options
Thoughts welcome...

kidmugsy

I'm interested to learn that your OH can buy additional years even though no longer working.

Who can possibly be funding such madness, I wonder? It's OK; gem16 will know.

fizio

kidmugsy wrote: »

I'm interested to learn that your OH can buy additional years even though no longer working.

Who can possibly be funding such madness, I wonder? It's OK; gem16 will know.

To be honest I'm not 100% sure my OH can buy additional years. technically she is 'still working' as she has been a 'supply teacher' for many years and just so happened to have not done any 'supply' work for a year or so.. If this becomes an issue then she could probbaly go and do a dyas work somewhere to be seen as 'working'..

Its all a bit of mystery and we do have a query logged vith TPS as well..

xylophone

http://community.tes.co.uk/tes_supply_teaching/f/62/t/471677.aspx
Is this thread of interest?

rpc

Is your OH likely to live for 15 years past NRA? Statistics say yes, in which case the offer is a bargain.

The £1k won't really be "worth more" at NRA, the index linking means that it won't be worth less. So it might be £1.2k but that should have the same buying power as £1k today.

Buying an annuity, you'd be looking closer to double that cost to get the same benefit.

fizio

xylophone wrote: »

http://community.tes.co.uk/tes_supply_teaching/f/62/t/471677.aspx
Is this thread of interest?

Thanks, I wasn't aware of this forum but it looks a good place for TPS stuff. Though I'm not sure I agree with the OP from your linked thread
Quote
Most supply teachers, unsure if they are actually going to have any work in the short or long term, would not entertain handing over a lump sum now for a future increased payout in retirement. I'll actually have a great monthly income with the state retirement pension and my modest TPS pension than I have nowfrom drastically reduced supply bookings. There's no way I'm putting savings into expensive extra TPS provision.
End Quote

fizio

rpc wrote: »

Is your OH likely to live for 15 years past NRA? Statistics say yes, in which case the offer is a bargain.

The £1k won't really be "worth more" at NRA, the index linking means that it won't be worth less. So it might be £1.2k but that should have the same buying power as £1k today.

Buying an annuity, you'd be looking closer to double that cost to get the same benefit.

I agree in that at face value it does seem good value - so will try and see if I can use it to get a few extra quid pension for OH

jem16

kidmugsy wrote: »

I'm interested to learn that your OH can buy additional years even though no longer working.

Who can possibly be funding such madness, I wonder? It's OK; gem16 will know.

That's an easy one - the answer is no-one as you can no longer buy additional years from 2008.

As to Additional Pension which has taken over from Additional Years and is not as good, the answer is still no-one.

From the Scottish Teachers' Scheme ( and I am pretty certain that the TPS follows the same rules );

The facility to purchase Additional Pension (AP) was introduced following pension reforms.
It is paid in addition to standard benefits at retirement and is only available to active contributing members who are in good health, are not absent from work and have not reached age 65.

However the OP later added that his OH was actually still working as a supply teacher.

Supply Teachers;

if you are a supply teacher you may only purchase AP by a one off lump sum payment as you are not paid a regular salary

jem16

haf63 wrote: »

The deal is approx £15k payment for £1k additional pension per year at NRA.

What age is your OH now? You have to weigh up how much £15k invested now for however long would grow and then how much of a pension it would buy you.

Freecall

jem16 wrote: »

What age is your OH now? You have to weigh up how much £15k invested now for however long would grow and then how much of a pension it would buy you.

1/15 = 6.7% - Index linked and UK Government guaranteed for life.

That would take some beating.

Actually, purchased at retirement age (60) it would cost just under £20k so it is effectively a reverse commutation of 1/20 or 5% but still pretty good compared with an index linked annuity. You might beat it in draw-down but who knows? The Government guarantee has the edge I would think, not to mention the peace of mind.

Andy_L

Freecall wrote: »

1/15 = 6.7% - Index linked and UK Government guaranteed for life.

That would take some beating.

Actually, purchased at retirement age (60) it would cost just under £20k so it is effectively a reverse commutation of 1/20 or 5% but still pretty good compared with an index linked annuity. You might beat it in draw-down but who knows? The Government guarantee has the edge I would think, not to mention the peace of mind.

The extra pension will be CPI linked rather than RPI linked like the [STRIKE]pension[/STRIKE] annuity though. You do have the risk of therm pulling another RPI/CPI switch type move.

Its a close run thing between extra pension and the other options (pension/ISA)