Planning my parent's retirement

justme111

Was not there automatic lump sum for all accrued till 2015?

Silvertabby

Correct me if I'm wrong, (I'm ex LGPS) but I thought that the accrual rate changed from 1/80th with an automatic lump sum of 3 x the pension to 1/60th with no automatic lump sum in 2007?

All things considered, there's very little difference in the overall value of the 2 accrual rates.

ent_moot

OP - you'll need to have another look at your mum's State pension entitlement. As she was a member of the TPS, she will have contracted out of SERPS/SP2, and so her pension will be based on the old rules - ie, could be £120/30/14.5 = £58 per week.

Thank you. I didn't know about this. It looks like you are right and that state pension will be lower than hoped.

you seem to think that Devon is a cheap area for property. It's cheaper than London, but is still classed as an expensive area

We're just going on rightmove prices - it appears to be very good value, though not as cheap as "up North", or Cornwall.

Also, you don't seem to have factored in any emergency funds - car breaking down, boiler blowing up, etc.

Yes I agree. If they can get about £2500 per month, that leaves about 1200 per month to survive on. Currently, this is not enough for them, even after I optimise all their bills. So, I may top them up with a few hundred per month as a zero interest loan that they can pay back if they sell up later.

The numbers for teachers pension lump sum seem wrong. Is not lump sum 3 times the annual pension ? If so either your LS or annual pension is wrong.

I've used the calculator on https://www.teacherspensions.co.uk. It says there are two options:

a) 6900 annual + 21k lump sum
b) 5600 annual + 37k lump sum

I think that b) is a much better option, because they're not going to get above the pension credit cap long-term, so the extra annual is pointless after full retirement. I'm not 100% certain that b) is available. We may have to explore it further. It will be very disappointing if it is not an option as we will have to think of some other way of dealing with their loans (i.e. me dipping into my savings).

PIP + pension credit seem too high to me as well, have you used benefits calculator to come up with it ?

I read up on the government site. As I understood it, pension credits will take a couple up to about 970 per month. However, this goes up to 1200 if one of you is a primary carer. Then, PIP is always on top of this. So that's approximately £1700. I may have misunderstood this though, so I should probably run it through a calculator too. Does anyone have a user-friendly one to recommend?

LHW99

As SilverTabby says, TPS originally had an automatic lump sum + pension, with no options to rebalance. Those options came in later.

molerat

Silvertabby wrote: »

Sorry molerat, but you're a bit out - a woman born on 1 Jan 1954 (so would have been 63 on 1 Jan this year) gets her State pension at 65 years 2 months 5 days, rising to 66 for those born later in the year.

A woman who is "currently 63" can have a SP date of between 6 Nov 2017 and 6 July 2020 hence my comment about needing research done now and not rely on finger in the air guesswork. https://www.gov.uk/state-pension-age

ent_moot

As SilverTabby says, TPS originally had an automatic lump sum + pension, with no options to rebalance. Those options came in later.

I see. So the only option will be the first one, which is extremely disappointing. People always talk about how good teacher pensions are. However, it seems that they are dreadful in certain scenarios.

kidmugsy

ent_moot wrote: »

People always talk about how good teacher pensions are. However, it seems that they are dreadful in certain scenarios.

If you think the TPS is dreadful you're living in cloud cuckoo land.

xylophone

Have you read post 5 and post 8 and checked the links (or asked your parents to check them)?

People always talk about how good teacher pensions are. However, it seems that they are dreadful in certain scenarios.

Can you explain your opinion?

ent_moot

Have you read post 5 and post 8 and checked the links (or asked your parents to check them)?

Yes, I have read them. Their state pension age is what I originally calculated.

As to the link to the TPS page, it is not at all clear how the calculations are made in the case of a transition. For example, if you carry on working beyond 2015, then how is the lump sum calculated?

As to receiving an automatic lump sum in 2015, this never happened. I'm assuming she will get the lump sum now. We're in contact with the teacher pensions and the school to see where things are at. It's possible that they've made an error and haven't paid it out - we shall see.

Can you explain your opinion?

Well, imagine she had an ordinary pension scheme (like my own) with 100k paid in. She could take 25k lump sum, and then ~50k after tax. She could then cover most of her mortgage and survive on pension credit.

After she fully retires, her TPS becomes "worthless" as it doesn't take her above the pension credit cap.

Put it another way: she and her school has paid in well over 120k over the past 14+ years. She is going to get a fraction of this out because, after full retirement, she would be receiving the money from pension credit regardless.

I can see how it's a fantastic scheme if you've contributed your whole life and, between you and your partner, you're well over the pension credit cap. However, if you're under it then the inflexibility of it makes it pretty bad.

Then again, I'm very ignorant about pensions and I suppose, historically, it's normal to be forced into buying annuities.

justme111

If she had an ordinary pension she probably would have about one third in it of what she has in it now.
I understand where you coming from but something about being unhappy with a pension scheme because it does not let one use benefits to the maximum does not feel right to me.