Teacher pension scheme options 15 October 2019 at 10:30AM edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning 69 replies 6.5K views

GAry

My wife turned 55 this week and we are now investigating what the best options are for teacher PRU AVCs phased drawdown (£116k transfer pot).
Our draft plan is currently to take ~£15k per year tax free for 5 years until the DB pension kicks in at age 60. Tax free limit will increase in future, so the AVC remainder can be added to the DB £14k annual income.
What seems to be apparent is that the Pru insist on 'advice' charges plus ongoing fees.
We are 'semi-sophisticated' investors and don't wish to pay for advice services we don't need.
We are now considering a transfer to avoid these unnecessary advice costs. HL SIPP is looking like an option, but others are also being checked, based on costs and fund choices available.
We also have some cash available, due to a house sale, so ongoing pension investment (£4k/year?) also needs to be considered.
Any experience of companies or platforms to avoid? ( Or recommended)

zagubov

GAry wrote: »

My wife turned 55 this week and we are now investigating what the best options are for teacher PRU AVCs phased drawdown (£116k transfer pot).
Our draft plan is currently to take ~£15k per year tax free for 5 years until the DB pension kicks in at age 60. Tax free limit will increase in future, so the AVC remainder can be added to the DB £14k annual income.
What seems to be apparent is that the Pru insist on 'advice' charges plus ongoing fees.
We are 'semi-sophisticated' investors and don't wish to pay for advice services we don't need.
We are now considering a transfer to avoid these unnecessary advice costs. HL SIPP is looking like an option, but others are also being checked, based on costs and fund choices available.
We also have some cash available, due to a house sale, so ongoing pension investment (£4k/year?) also needs to be considered.
Any experience of companies or platforms to avoid? ( Or recommended)

They might still need you to prove you've spoken to a financial adviser, which would involve a charge. Hopefully some of the more experienced posters would know if there's a workaround for that.

FIRSTTIMER

My advice is not to bother with Faster Accrual or APB at the minute, the TPS was reviewed this year and all flexibilities have increased DRAMATICALLY so until you get a better return or a cheaper option (at the next review) or a Labour government haha, go for a LISA instead.

GAry

Thanks, my understanding is that only DB/final salary schemes worth more than £30k that are being considered for transfer & drawdown are mandated to have advice.
I'll check before any final decision is made.

Suffolk_lass

We had some property-related money available when my DH (a teacher) reached mid fifties. He was a mid-career switcher to teaching and hoping to retire at 60 (he has just retired, just before his 61st birthday - but he might do a bit of supply work to top up his teachers pension). Anyway the point I wanted to make is that we put a lump of the available money into his TPS - from memory it was about £23k. This bought him £1250 extra per annum, a lump sum of over £2k, 50% dependant benefits and a tax refund of (I think) just over £4.5k at the end of the tax year - all benefits calculated were based on a retirement date of 60. He worked an extra 10 months to the end of the school year + summer hols and all of these (benefits) were slightly increased. I thought this represented a good return on that money (better than S&SISA), with the certainty of the return while he lives. He also has a private pension pot that we draw-down gradually between now and SPA.

By the way, your wife may wish to top up her state pension after stopping work at 60 (even if she has the right number of years) in order to mitigate the reduction of being opted out of SERPS (assume she was - vast majority of occupational pension holders were) until 2015 - ie Basic vs Full State Pension. The GOV.UK State pension forecast does assume you will pay for every year until the April before you draw state pension.

GAry

Thanks, we will look at a topup to the TPS. However, she has been on the CARE scheme for the last few years (NRA65) and not the original (NRA60) scheme. This means that if she takes the combined scheme at 60, then the NRA65 element has 5 years of penalties applied, which is rather costly. I suspect, that any options to put cash into the TPS would be into this NRA65 scheme, which would then be subject to the penalties.
The state pension projection is currently about £150/ week, so there is some limited option here to max out for a few years. She is also doing the occasional day as a supply teacher.
Thanks

tigerspill

GAry wrote: »

Thanks, we will look at a topup to the TPS. However, she has been on the CARE scheme for the last few years (NRA65) and not the original (NRA60) scheme. This means that if she takes the combined scheme at 60, then the NRA65 element has 5 years of penalties applied, which is rather costly. I suspect, that any options to put cash into the TPS would be into this NRA65 scheme, which would then be subject to the penalties.
The state pension projection is currently about £150/ week, so there is some limited option here to max out for a few years. She is also doing the occasional day as a supply teacher.
Thanks

Just be careful when thinking about the "penalty". It isn't actually a penalty - it is a mathematical actuarial reduction that in theory would not disadvantage the person. Yes the yearly payment is reduced. BUT you get it for longer. But if there is no other income, then taking earlier actually has some tax advantages.
It is worth doing the maths before ruling taking it early.

GAry

Hi tigerspill.

This is a combined scheme. Both elements have two different NRAs.
The majority element (NRA60) accounts for maybe 95% of the income. The smaller element has an NRA of 65.
The point is, that we think it makes most sense to take the whole income from age 60 and take the actuarial reduced value from the NRA65 smaller element.
I have used penalty description to keep things simple. Also, in many ways it feels like a penalty, due to the 'moved' goalposts after 20+ years employment and contributions into a pension that was to deliver at age 60.

tigerspill

GAry wrote: »

Hi tigerspill.

This is a combined scheme. Both elements have two different NRAs.
The majority element (NRA60) accounts for maybe 95% of the income. The smaller element has an NRA of 65.
The point is, that we think it makes most sense to take the whole income from age 60 and take the actuarial reduced value from the NRA65 smaller element.
I have used penalty description to keep things simple. Also, in many ways it feels like a penalty, due to the 'moved' goalposts after 20+ years employment and contributions into a pension that was to deliver at age 60.

My OH is in exactly the same position and currently thinking of doing the same - taking at 60 with the CARE part actuarially reduced.

zagubov

As many pensioners want to work part-time, is there a way of collecting your NRA60 final salary at 60 (with/without lump sum), then continue to work while building up your NRA 65 career average until you can take it later?