Teachers Pension - Value?

nufc_fan

I currently earn £52000 and pay 7% into my pension with employer offering 5%.

I have the opportunity to move into the TPS which is a 10.2% contribution from myself and I believe around 14% from employer.

The job would involve a £5000 pay cut, so after tax around £3000. I am trying to put a value on the TPS to see if longterm I am actually better off.

Any thoughts? (Age 29)

atush

my thoughts are,

it is worth somewhere between 25-30% of your salary. The 30% figure would include death in service and spousal pension. So if no spouse and dependents at this time, call it 25%.

hugheskevi

Each year of service you will accrue pension of £47,000 * (1/57)=£825, which is revalued by CPI+1.6% whilst you remain in service and by CPI if you leave.

Looking at the Government Actuary's Department factors for NHS Additional Pension, the table on page 57 suggests a 29 year old could purchase £250 of Additional Pension (including dependent benefits) for a premium of £136.60 paid each month for 12 months, a total of £1,639.20. Dividing £1,639.20 by £250 suggests each £ of pension is valued at a cost of £6.56 for a 29 year old.

Applying that £6.56 to the £825 of pension you would accrue suggests a total value of £5,409.

That figure is an underestimate of the value however, as main scheme pension will be revalued by CPI+1.6% and also provide death and ill-health benefits. How much these things increase the value beyond £5,409 will depend primarily how committed to remaining in employment eligible for the scheme you are (as then you benefit from annual revaluation of CPI+1.6%), and secondly on your attitude/need for death and ill-health cover (and any other valuable ancillary benefits offered by the scheme).