Teachers' Pension Scheme

jem16

whitesatin wrote: »

I didn't think you could pay in more than 40 years contributions but she definitely still pays them thinking that it is worth it because her pension, when she takes it, will be based on her last few years of salary which is increasing due to pay rises.

Can anyone clarify this for me please?

45 years is the maximum she can contribute. Pension is based on the final salary or the best 3 years out of the last 10 years revalued. For teachers today the figure used to calculate benefits is not the final salary but the best 3 years out of the last 10 as that is very much higher just now.

Backbiter

Thanks for clearing up my errors! I know the scheme depends on when you joined and how close you are to retirement, but I was always under the impression that the maximum contributions were 40/80ths. Andy L gave the correct 45 years figure in post 2.

kidmugsy

Backbiter wrote: »

Thanks for clearing up my errors!

What refreshing courtesy. Hats off.

rpc

Backbiter wrote: »

I think the percentage who do make the 40 years of contributions is under 5%, although the Government, when calculating the liabilities of the scheme, assumes all teachers take the maximum pension, which is totally untrue, but there you go.

The actuarial reduction for early retirement is normally cost-neutral on average. Retiring early costs more so your benefits are reduced to balance the cost and ensure that nobody is being subsidised on the basis of their chosen retirement age.

Those who receive less pension per annum because they retire early will, on average, receive that sum for longer.

So early retirement shouldn't affect scheme liabilities.

A former employer of mine used to waive the actuarial reduction primarily as a means to reduce headcount without having to go down the redundancy route. An awful lot of people retired the month that this stopped. We had another large wave of retirements when the overly generous factors on a legacy scheme were updated (doubled) to make them cost-neutral.

Minrich

edited !!!!

whitesatin

Minrich wrote: »

She would be better off taking her pension and then getting another teaching job . She is not benefiting from her extra pension contributions as they are 9.6% of her salary and her pay would have only increased in the last 2 years by 1% like all public sector workers , so not worth it .
Her pension will only be taxed and no nat insuarance . Her new job will pay full tax and nat ins . There will be a need to have a gap between retiring and getting another job due to tax implications .

She is a Head Teacher so I doubt that she would want to do as you suggest. I can see that working otherwise, thanks.

Minrich

edited !!!!!

Deneb

Minrich wrote: »

Police officers stop paying if they are on the 1987 scheme at 30 years as they get no increase in pension benefit by doing so , police is the best year in last 3 years to base their pension on .

Not necessarily. I was in the 1987 scheme and retired after 35 years service. I continued paying into the pension because my pension was finally calculated on my salary at my retirement date rather than frozen on the basis of my salary five years earlier, plus I would have lost what I considered to be valuable death in service benefits if I had stopped paying into the scheme. Admittedly I was benefitting from average 2 - 3% annual pay rises at the time. It would be different now with no pay increases for the last few years.

rpc

Minrich wrote: »

But she should have stopped paying pension contributions at 40 years , she is wasting her money as she does not increase her pension (apart for her slight pay rises) . If she is a head teacher then she will be wasting quite alot of money .

She will be increasing the number of years in the scheme, which will increase her pension even if her final salary doesn't increase. Of course, the indexation on deferred benefits might exceed this.

Death and ill health benefits also normally change rather drastically when you stop being an active member.

jem16

rpc wrote: »

The actuarial reduction for early retirement is normally cost-neutral on average. Retiring early costs more so your benefits are reduced to balance the cost and ensure that nobody is being subsidised on the basis of their chosen retirement age.

Those who receive less pension per annum because they retire early will, on average, receive that sum for longer.

So early retirement shouldn't affect scheme liabilities.

I think backbiter was referring to the fact that most teachers wouldn't be able to get a full 40 years service as they would start teaching at age 21(at the earliest) and retire at age 60, so only 39 years possible.

That has changed now with newer teachers having a retiral age of 65 at least.