Teachers pension what to do

Mr_Pegs

I have a a few questions. I have contributed to the teachers pension for 28 years I am 57. I have been informed by my employer ( a college ) That my job in under threat I can leave with a severance lump sump slightly above the statutory rate required, or stay on and work 18.5 hours per week rather than my current 37 hours.I am eligible for state pension at 66 years.

I enjoy the work in the main however if I stayed on I would be working for nothing for 2 years as versus taking the severance ( hope that makes sense ) after that I would be in profit after my 59 B/D

I am debt free my wife is on pension plus state pension and fine we have saving.

I have always worried about money and tried my hardest to save and planned to retire at 60 and take teachers pension and wait till 66 for state pension to kick in. However I must choose to stay and work effective for nothing or take teachers pension early 13% reduction from 60 years on age. Plus if I do take teachers pension do I take lager lump sum or smaller. one would be £9602 pa v £8400 pa pension (not lum sum).I have no dependants.

I am terribly anxious on what to do and have till Wednesday this coming week to decide what to do if I do nothing I would be made redundant basic terms!

I could always look for another job however easy to say hard to do,

This is quite a ramble hope it makes sense to anyone reading advice or thought are welcome teachers, financial retired guys help. Thanks

jem16

Mr_Pegs wrote: »

I have always worried about money and tried my hardest to save and planned to retire at 60 and take teachers pension and wait till 66 for state pension to kick in. However I must choose to stay and work effective for nothing or take teachers pension early 13% reduction from 60 years on age.

Can you take the severance but not take your pension early? You say the severance will be about 2 years worth of salary - then you would only have a year till you can take your pension unreduced. Can you cover that year?

Plus if I do take teachers pension do I take lager lump sum or smaller. one would be £9602 pa v £8400 pa pension (not lum sum).

It's a dire commutation rate. Much better just to take the automatic lump sum and the higher pension.

Mr_Pegs

Many thanks for response

Can you take the severance but not take your pension early? You say the severance will be about 2 years worth of salary - then you would only have a year till you can take your pension unreduced. Can you cover that year?

Yes I can take severance this would be 2 years P/t salary not full time I guess I could cover the extra year but using saving if I left till 60 pension on default lump sum pension would be £11071 pa

It's a dire commutation rate. Much better just to take the automatic lump sum and the higher pension.

In layman's terms do you mean don't take bigger lump sum take lower lump sum larger annual pension correct?

Oh forgot to add I have AVC with teachers pension worth approx 25,000

jem16

Mr_Pegs wrote: »

Yes I can take severance this would be 2 years P/t salary not full time

Why p/t salary as opposed to full time?

I guess I could cover the extra year but using saving if I left till 60 pension on default lump sum pension would be £11071 pa

Well no point in taking it early if you can manage otherwise.

In layman's terms do you mean don't take bigger lump sum take lower lump sum larger annual pension correct?

Yes. Your pension comes with an automatic lump sum of 3 times your annual pension. You can't take any less lump sum but better not to take any more.

Oh forgot to add I have AVC with teachers pension worth approx 25,000

Then use that over the next few years when you have no earnings or state pension coming in. It means you can take 25% tax free so £6250 tax free. You could then take up to the annual personal allowance tax free each year as well so you could basically get the whole of that AVC pot tax-free over the next few years till you are age 60 and can take your Teachers' Pension unreduced. This will be far better for you.

Just make sure that your Teachers' pension would be reduced if taken early. Often severance packages come with your employer paying the difference so you can get it unreduced.

Mr_Pegs

Why p/t salary as opposed to full time?

The severance would be the equivalent of staying on P/T v taking severance or 1 year 3 months full time current wage as in net current salary ( hope I am explaining myself sorry if not )

Then use that over the next few years when you have no earnings or state pension coming in. It means you can take 25% tax free so £6250 tax free. You could then take up to the annual personal allowance tax free each year as well so you could basically get the whole of that AVC pot tax-free over the next few years.

In a nutshell I could every April ask for £6250 tax free for the next 4 years till AVC empty is this called draw down excuse my lack of knowledge

jem16

Mr_Pegs wrote: »

In a nutshell I could every April ask for £6250 tax free for the next 4 years till AVC empty is this called draw down excuse my lack of knowledge

You're allowed £6250 tax-free right away. The remaining £18750 is taxable but keep your withdrawals below the personal tax-free allowance ( Currently £10,600 ) and you will pay no tax as you have no other income.

Yes this is called drawdown. You will need to check if the AVC provider will allow you to drawdown - otherwise transfer to a provider that does.

Mr_Pegs

Yes this is called drawdown. You will need to check if the AVC provider will allow you to drawdown - otherwise transfer to a provider that does.

This is who the AVC is with PRU looks like they do I don't know if there any any associated charges.

https://www.atl.org.uk/pay/pensions/teacher-prudential-avc.asp

Mr_Pegs

Jem 16, it looks like they don't do draw down upon closer reading. I guess I will have to transfer before I take out any money correct?

I will have to transfer another provider and speak to a body such as 'pension wise' to see who is OK with this process have you any suggestions?

jem16

Mr_Pegs wrote: »

Jem 16, it looks like they don't do draw down upon closer reading. I guess I will have to transfer before I take out any money correct?

It says they will allow partial withdrawals with each withdrawal giving 25% tax free and the rest taxable, which in your case means it's tax free. This would do the job for you without transferring.

Mr_Pegs

the rest taxable, which in your case means it's tax free

Due to me not being employed correct ?

I must thank you for time and effort sincerely appreciated

Mr_Pegs

I guess I could take one drawn down this tax year tax free ?