Break from Teacher Pension

Unknownbloke

Hi,
I guess I'm looking for a bit of advice as I'm being told conflicting things.

For context I have a teacher pension which I've paid into since I began teaching 9 years ago and I'm looking to take a 1 year break to save for and pay for a wedding and pay towards the upkeep of a house I've bought in Italy. I'm also looking to move an live in Italy at some point within the next 2 to 4 years with my partner at an international school but it's unlikely I will find a school that pays into the teacher pension scheme in the UK.

I'm being told by some colleagues I should 100% not take a break as it isn't worth it. But at the same time if I don't then I'll end up getting into debt to pay for the wedding etc and it's preferable me moving to Italy with no debt as employment conditions are less stable and I don't want to be worrying about loans or credit cards. I think it'd also be easier to save up with that extra income.

Does anyone have any advice on what I should do or insight on the implications etc?

Cheers

hyubh

Unknownbloke wrote: »

Does anyone have any advice on what I should do or insight on the implications etc?

Opting out would be like taking a pay cut of 20%, if you take into account the retirement income forgone.

dunstonh

I'm being told by some colleagues I should 100% not take a break as it isn't worth it.

The teacher's pension is worth around 25% of your salary. You would be daft to stop paying into it. Really daft. It would potentially be one of the worst financial decisions of your life. It costs you little in contributions but worth so much.

Unknownbloke

To those above, even for a 1 year break? I'm planning to start it again, just thinking it'll alleviate the pressure over the next year.

Paul_Herring

I have suggestions, but I suspect I'd be castigated for suggesting not spending so much on the wedding, or not moving to countries where job prospects don't look very positive...

AnotherJoe

Why not budget an expenditure on your wedding that doesn't involve taking a stupid financial hit on your pension which will probably long term double or more the cost of this already overly* expensive wedding.

* overly expensive as it's so costly you havent managed to save for it out of normal expenditure.

Mr_EDATD

Sounds like a bad idea to me. Would be better to do a year of both really cutting back and reducing existing expenditure or getting a second jobs in available spare time. A teacher friend of mine made a fair bit from marking exam papers so you could look into that.

You may already know this but by coming out of the pension scheme it doesn't mean that you receive all of what is currently deducted on your payslip - you will pay more in tax and national insurance.

You will struggle to find a saving scheme that delivers such good value, whereas in my experience my wedding day was the worst value for money investment i have ever made (divorced 3 years later). Obviously it is not an investment and you shouldn't be going into it expecting it to fail. I hope that this doesn't happen to you, but thought it worth pointing out that it isnt that rare.

Oliver1191

I used to think like you. It took a lot of reading on sites like these as well as reading a lot about FIRE.

Every year you are in the scheme your benefit statement grows by cpi + 1.6%.

The teachers' pension is updated monthly now. Why don't you track it monthly to get a feel at how much it grows?

Because i've done so much research, i know i've already achieved a lean FIRE in retirement. I wont come out of the TP now unless i leave teaching as my guaranteed income keeps growing as a result.

hugheskevi

I'm looking to take a 1 year break to save for and pay for a wedding and pay towards the upkeep of a house I've bought in Italy.

Consider it akin to musing about taking out a very high interest loan. Yes, you get the money immediately, but at a very high long-term cost.

I'm being told by some colleagues I should 100% not take a break as it isn't worth it.

Good to see that they understand the pension, there are a lot of myths and incorrect beliefs about.

I'm looking to take a 1 year break to save for and pay for a wedding and pay towards the upkeep of a house I've bought in Italy.

The average member contribution rate is 9.6%. Deduct 20% income tax relief (assuming basic rate taxpayer) and that leaves 7.58% of salary increase. I doubt that would come close to even covering a wedding.

But at the same time if I don't then I'll end up getting into debt to pay for the wedding etc and it's preferable me moving to Italy with no debt as employment conditions are less stable and I don't want to be worrying about loans or credit cards.

Are you sure 7.68% of salary is such a huge amount? A loan would certainly be cheaper in the long run than opting-out for a year.

even for a 1 year break?

Gain 7.68% of salary in the short term, at a cost of about 20% of salary (the value of the employer contribution).

Even with a very high interest loan, it would be still cheaper to get a loan. But preferably just don't spend so much and pay from it all ideally within available funds, or else on a 0% purchases credit card that can be repaid over time.

You may already know this but by coming out of the pension scheme it doesn't mean that you receive all of what is currently deducted on your payslip - you will pay more in tax and national insurance.

Teacher's pension does not operate salary sacrifice, so the National Insurance payments are the same whether in or out of the pension scheme.

Unknownbloke

Thank you! Very helpful. I'll stop with the pension and just cut back for a year on other things.

Unknownbloke

AnotherJoe wrote: »

Why not budget an expenditure on your wedding that doesn't involve taking a stupid financial hit on your pension which will probably long term double or more the cost of this already overly* expensive wedding.

* overly expensive as it's so costly you havent managed to save for it out of normal expenditure.

This is why I'm asking the *stupid* questions now so I know what I'm doing. I wasn't 100% sure it was a good idea but I know a number of colleagues who have done this.

Also I'm planning the wedding and working out how much things are and what's affordable for us. Thanks for being so useful and positive and not at all condescending.