Teachers Pension Scheme - Deferment after 60

Alice_Holt

A 64 year old friend has a TPS pension (payable from age 60) which he has not yet taken.
He is currently a member of the University Superannuation Scheme, and intends to continue working past SPA.

He thinks in the tax year when he decides to take his TPS pension (some £6k), this will trigger a back payment of the previous years pension outstanding (some £25k). This, in combination with his salary, would take him well into the 40% tax band.

He has asked me for advice (personal finance is not his strong point and he can be rather vague about details).
I have suggested he contacts TPS to see:
1) If he can take the annual pension, but defer the back payment of the previous years pension to a future tax year;
2) If there is an option to increase future payments of the TPS annual pension, rather than take a lump sum back payment;
3) If TPS offer any flexible options.

It occurred to me, that they may be some experts on this forum familiar with the TPS who might know the answers, or may be able to offer some helpful suggestions.

Many Thanks.

xylophone

He is a deferred member of the Final Salary Section? TPS have produced a Guide for Deferred Members


Deferred Member:
Your guide
to your pension
July 2017


Once you reach your Normal Pension Age (NPA)
and provided you are out of service you should
claim your benefits. If you continue in pensionable
service after you reach your Normal Pension Age
your benefits will be paid from the last day of
pensionable service. If you delay making your
claim then your benefits will be backdated to your
last day of service or when you reached your NPA,
whichever is the later. Any backdated payments will
be paid as a lump sum and will be subject to tax.

xylophone

Poster jem16 is very familiar with TPS.

http://forums.moneysavingexpert.com/member.php?u=52024

jem16

Alice_Holt wrote: »

He thinks in the tax year when he decides to take his TPS pension (some £6k), this will trigger a back payment of the previous years pension outstanding (some £25k). This, in combination with his salary, would take him well into the 40% tax band.

That is the normal situation. He would have been far better taking it when it was due at age 60.

He has asked me for advice (personal finance is not his strong point and he can be rather vague about details).
I have suggested he contacts TPS to see:
1) If he can take the annual pension, but defer the back payment of the previous years pension to a future tax year;
2) If there is an option to increase future payments of the TPS annual pension, rather than take a lump sum back payment;
3) If TPS offer any flexible options.

It would certainly be in his best interests to contact the TPS but I’m pretty sure 2 and 3 are not options. 1 would be unlikely as taking the pension would trigger the lump sum.

mgdavid

jem16 wrote: »

That is the normal situation. He would have been far better taking it when it was due at age 60.



It would certainly be in his best interests to contact the TPS but I’m pretty sure 2 and 3 are not options. 1 would be unlikely as taking the pension would trigger the lump sum.

maybe he should open a SIPP or other private pension and put the payments in there, thus regaining any tax paid?

Alice_Holt

jem16 wrote: »

That is the normal situation. He would have been far better taking it when it was due at age 60.

It would certainly be in his best interests to contact the TPS but I’m pretty sure 2 and 3 are not options. 1 would be unlikely as taking the pension would trigger the lump sum.

Thanks for this information.

That was my thought. He could have recycled it annually into a SIPP / AVC and built up a fund to help towards any additional care costs required in later years.

I'm not sure putting a £20-25k lump sum into a SIPP without financial advice, given today's markets, is entirely recommendable for someone with limited knowledge of personal finance ( and who holds no S & S investments.), even though it would reduce the taxation take.

I wouldn't often suggest the services of an IFA, but I think it may be worthwhile here, as in addition to the TFLS and backdated pension due, he also has cash savings which have been earning little (or no) interest.

xylophone

He may find this helpful.

https://directory.moneyadviceservice.org.uk/en