Opting out of Teacher Pension

Legacy_user

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Thank you to those who actually positively contributed to this thread. Unfortunately however this thread and so many others seem to have become a hot bed for trolls, even the professional financial advisor in this thread seems to be using it to blow off steam so he can talk down to people who don't have a background in finance. How big he must feel.


It is for that reason my (meagre) number of posts have been removed and my account has been deleted. I have encountered better etiquette in online communities run by 16 years olds and am astonished this kind of behaviour exists among adults supposedly offering help to one another.
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AnotherJoe

Most people would say you'd be barking to opt out of teachers pension since it's benefits will be far better than you'd get by just contributing yourself. As on the tune of 3-4x better, only downside the date flexibility which can be managed by using those employers pension to fill in any gap.

However I say as a taxpayer please take the self funding option because it's better for the national deficit if you decline that free money and instead do it all yourself.

flashg67

For something so important, I'd see an advisor or speak to someone at pensionwise.gov.uk.

Generally speaking, final salary schemes are a no brainer, Even though they've been devalued in recent years, they're still a good bet. Wish I had one!

Kynthia

If you don't understand the pension then why would you risk giving up the employer's contributions??? You already have flexibility with your existing pensions and this scheme would give you some valuable guaranteed pension for life no matter how long you live.

As well as losing an indexed pension for life do you know what else you are giving up by opting out? Are you giving up any death in service benefit, which can add to any life insurance provision you have? Does the scheme pay out to a spouse for life and to children until they are about 18 years old if something happened to you? If you became to ill to work does it offer the possibility of an ill-health retirement?

Many career-average DB schemes have a payback rate of approximately 3 years. So just 3 years after claiming your pension you are receiving more than you paid in. Is that the case for your scheme and how will that compare to your sipp?

System

flashg67 wrote: »

For something so important, I'd see an advisor or speak to someone at pensionwise.gov.uk.

Generally speaking, final salary schemes are a no brainer, Even though they've been devalued in recent years, they're still a good bet. Wish I had one!

Thanks I will do that!

kidmugsy

BouncingCzech wrote: »

1. Opt out of Teacher Pensions
2. Start my own SIPP
3. Transfer everything in to that
4. Contribute to it monthly

It would be absolutely the right thing to do to opt out of the TPS. Brilliant! Excellent! Taxpayers will cheer.

Or maybe this post is an April Fool's joke one day late.

hyubh

BouncingCzech wrote: »

The Teacher Pension is not contribution based, it's final salary (from what I can tell anyway).

No, while salary-related it's now CARE ('career average revalued earnings') - basically you accrue pension at a fraction of your pensionable pay each year, which is then revalued thereafter:

• Year 1: earnings of £30,000. Accrual rate is 1/57, so the pension earned for the year is £526.
• Year 2: earnings of £32,000. First we need to revalue the pension earned previously; the TPS revaluation rate is CPI + 1.5%. Let's say CPI was 1%, so the revised pension is (526 * 1.025) + (32,000 * 1/57) = £1,101.
• Year 3: earnings of £34,000. Assuming CPI was (say) 1% again, the pension after year 3 is now (1,101 * 1.025) + (34,000 * 1/57) = £1,725.

Plus it just seems to go by 'years of service' rather than what I'm actually contributing.

Sort of, though given the contribution rate is a percentage of pensionable pay and the accrual rate is another percentage (or fraction) of pensionable pay, it can feel like there's a relation. (This wouldn't hold in a final salary scheme, when it's length of service and your final pensionable pay that counts, not your earnings before then.)

With that in mind, how would my previous pension possibly transfer?

You could probably transfer it in, yes - basically, the value of your old pension would purchase additional pension to be added to your TPS account.

Do they just equate my current pension value to a number of years service?

No, because years of service is no longer a significant factor in a CARE scheme.

Also can I increase my contributions to a Teacher Pension?

Yes, there are various options - check out the TPS website.

Would that equate to more years of service?

No for the reason above.

one of the reasons I am tempted to Opt Out of this Teacher Pension is because I am admittedly quite fickle and can't imagine that I will be a teacher for the rest of my career

So what? A relatively shorter period just limits the benefit of the TPS' above-CPI active member revaluation rate.

I would quite like to go back in to the private sector at some point. In which case, what happens to my Teachers Pension? Is it just frozen at the value?

The pension would then become 'preserved' ('deferred') and revalue by the public sector pensions increase rate, which is currently CPI (no cap). Once in payment it would continue increase at the same rate.

Can I transfer it out to a private pension?

No, because transfers out of unfunded public sector schemes like the TPS is not allowed.

My current thinking right now:

1. Opt out of Teacher Pensions
2. Start my own SIPP
3. Transfer everything in to that
4. Contribute to it monthly

Why, that would be stupid - and you also don't need an advisor to tell you that. Start with the website:

https://www.teacherspensions.co.uk/campaigns/active/nqt-hub/member/nqt-hub.aspx

If you're in Scotland, the TPS is marginally different, and with a different administrator, but not materially so at your level of understanding.

I'm keenly aware I wouldn't be getting my employers contributions there but... I'm just trying to figure out if the flexibility of doing this myself and controlling my contributions outweighs that.

Erm, no. Have a read of this to get a flavour of how costly schemes like the TPS really are, and how the government obscures the fact with dodgy accounting:

https://www.nao.org.uk/report/evaluating-the-government-balance-sheet-pensions/

The start and end of the reports are the most enlightening parts...

EDIT: not sure what the problem with the website is, though if you're looking at 'tp.com', then I dare say the Trump-Pense Official Unoffical Blog isn't very helpful! The factsheet link on the page I gave above works fine for me (https://www.teacherspensions.co.uk/~/media/Campaigns/2016/NQT/Pension%20planet%20Fact%20Sheet%20V7.ashx)

System

hyubh wrote: »

EDIT: not sure what the problem with the website is, though if you're looking at 'tp.com', then I dare say the Trump-Pense Official Unoffical Blog isn't very helpful! The factsheet link on the page I gave above works fine for me

Haha I'm definitely on the right website thanks! ;-)

I was referring to if you open the Fact sheet and then click the links at bottom like "what buy out means" and "more information and the forms you need" for a transfer, all those hyperlinks are bust!

atush

Youd be completely insane to opt out of the Teachers pension. Those employers contributions should be worth around 20% or so of your salary.

Can you afford to flush that away