Transfer teacher pension?

ConfusedofYorkshire

I'll start by saying I don't really understand pensions so please forgive my possibly stupid questions!

My husband has been a teacher for 8 years, 8.7% of his wage goes into his pension every month.

He is going to leave teaching. He has been offered a job with network rail who offer 2 different pensions to newcomers. One is called CARE and one is called NRDC. From what I have read he can only move his teacher pension into CARE as teacher pensions stipulate that you can only move it into a defined benefit scheme. The other is a defined contribution scheme .

So my questions are:

Is it best to transfer his pension into this scheme or leave it where it is? What are the pros and cons?

If he leaves it where it is , then what will he actually get out of it in 35 years time? (He's in his early 30s so retirement is a long way away).

Thank you.

xylophone

If you type Deferred Member Teachers Pension into Google you will come up with a booklet detailing what happens if he stays in the scheme.

http://www.mynrpension.co.uk/care.aspx

Scheme booklet available here.

I notice that it says

Transferring previous benefits into
the Scheme
Subject to certain criteria, you can transfer
benefits from previous pension arrangements
into the Scheme. All transfers-in will be treated as
defined contribution (money purchase) benefits,
which means the transfer value would be
invested in the same way as Additional Voluntary
Contributions (AVCs).

If this is the case then in effect he would be transferring from DB to DC, even though the Network Rail CARE is a DB Scheme?

kidmugsy

xylophone wrote: »

If this is the case then in effect he would be transferring from DB to DC, even though the Network Rail CARE is a DB Scheme?

I suppose that would be the only way to transfer from the TPS into a DC scheme. In which case he'd have to decide whether he'd be happy to combine the network rail CARE scheme with this DC scheme. In his shoes I'd want to know whether the AVCs can be treated independently from the CARE pension; presumably they'd lack flexibility.

OP: what is his scheme retirement age in TPS if he simply defers his pension there? What is the his scheme retirement age in the CARE scheme?

ConfusedofYorkshire

The normal pension age for both is 65.

ConfusedofYorkshire

And thank you both. I find it all a bit confusing!

kidmugsy

The network rail scheme seems pretty decent to me. There aren't many companies still offering DB pensions to newcomers (insofar as nr can be viewed as a company). In your shoes I might like to know whether the network rail pension itself could be transferred later on into a DC scheme after he leaves their employment e.g. to a personal pension: to know your options is usually a good idea.

Two features took my eye.

(i) "Think SMART!" means that your husband can pay his contributions by salary sacrifice which is almost always a profitable thing to do.

(ii) If he does transfer his TPS pension then he has the prospect of drawing the money as a Tax-Free Lump Sum when he eventually does retire. That might tip the balance in favour of transferring.

It's hard to say any more unless you were to tell us the ratio of the capital that would be assigned to the AVC versus the annual teachers pension forgone.

jamesd

To know whether it is a good deal to transfer from TPS to Network Rail DB he will need to know what TPS will transfer in money terms and what that will buy in benefit in the Network Rail scheme. Then the two benefits can be compared and a decision made. No way to say good or bad properly without knowing that.

ConfusedofYorkshire

Ok I'll try to find those things out.

It also says that after 5 years service you become eligible to join RPS65.

I'm guessing this is a good thing as it says :
"Your pension will be based on your Pensionable Service (PS) and Final Average Pay (FAP).
FAP is usually your
Pensionable Pay (see above) in the last 12 months before date of retirement reduced by 75% of the average BSP at that date. The formula to calculate the pension is:
1/60 x FAP x PS.
Note: Promotional pay awards
will result in Pensionable
Restructuring Premiums which
are pensionable for future
service only"

As I understand it, schemes that take final salary into account and rare and sort after?

kidmugsy

Final salary schemes? Very desirable.

But I don't see how that affects the decision to transfer if the transferred value is treated as an AVC rather than a purchase of extra years of service.

Anyway, cheer up. Your husband has a choice of alternatives both of which are probably pretty good.

One last question. Once he's opened his nr pension, how long does he get to decide about the transfer? Commonly it might be two years: what is it with nr?