Teacher Pension Queries

MoneySaver241

cloud_dog said:

BishopBrennon said:

Your pension will give you £8374/year if you stopped paying in now and retired at state pension age. But if you stay opted in this figure will increase (as the final salary is potentially higher and the careers average earnings increases more in service [the careers average portion grows by cpi +1.6% while you are part oof the tps, but only increased by cpi after you opt out/leave), but you'll also build up more in the careers average (1/57 per year so over £1200 extra annual pension per year). If you kept working for 29 more years in the same salary your pension would be £35k higher than if you left the scheme now.  

To put that is some sort of context for the OP, to obtain a pension of £8374pa using money/cash, you would need to have saved / investments worth over £200k!!!!

What do you mean by OP? How can I tell how much I have accrued since I started paying in? Or is this the 8K?

MoneySaver241

BishopBrennon said:

Welcome to the forums!

MoneySaver241 said:

 

Do you think I should withdraw from the Teachers Pension Scheme to save the additional £7,931 p/a towards a deposit for a flat / home?

In a word - No. 

The death grant is given if you die in service (it's 3x your salary [fte if part time])... But you lose this most of benefit if you withdraw from the scheme. The family benefit is the annual value of a the pension your spouse would get if you died before them. 

Your pension will give you £8374/year if you stopped paying in now and retired at state pension age. But if you stay opted in this figure will increase (as the final salary is potentially higher and the careers average earnings increases more in service [the careers average portion grows by cpi +1.6% while you are part oof the tps, but only increased by cpi after you opt out/leave), but you'll also build up more in the careers average (1/57 per year so over £1200 extra annual pension per year). If you kept working for 29 more years in the same salary your pension would be £35k higher than if you left the scheme now.

Of course retiring early would reduce the annual pension (although I must confess I'm not entirely familiiar with the exact details for members in both the final salary and career average schemes..) 

Opting out means you lose out on higher revaluation and the comfort of the generous death grant should the worst happen (effectively it's life insurance to make sure your young family are provided for).

Although it's tempting to forego retirement planning to get on the property ladder, if you can keep in the tps your future self will thank you. Plus, once you opt out you might keep finding something else urgent to spend the money on and never get around to opting back into what is a generous guaranteed pension scheme. 

So are you saying that my final pension could be around £43K p/a based on what I currently have £8K and the additional £35k that you mentioned?
Is the 1/57 of my current salary and that’s added to the pot each year? 

Sorry for all the qs!

MoneySaver241

Dazed_and_C0nfused said:

I currently pay £660.99 pcm / £7,931 pa towards my teachers pension. My employer pays £1,385.16 pcm / £16,621 pa contributions. 

Your payslip may show you "pay" £660.99 but on a salary of £70k the real cost is only going to be about £397/month as that £660.99 is reducing your taxable salary from £70k down to about £62k so saving you c£3.2k/year in tax.

Thanks I had not realised this! Really appreciate your response. 

MoneySaver241

Grabs39 said:

There are calculators on the teachers pension scheme website which are quite useful.

You say your contribution is £7,931, but is that from gross income?  So you’ll pay 40% of that in tax if you don’t put make the contributions, as well as losing several times that in the value of the benefits you are in effect buying.

Ive always worked in the private sector, but my wife’s a teacher.  I’d give my back teeth for a pension as generous as teachers get.  We will be dependent on her pension for our plan to retire at 60, rather than 68 (though by the time we get there state pension age could rise even higher).

I’m yet to find a calculator that combines the career average and finally salary schemes. Which is why I’ve been so confused! Appreciate your advice. 

cloud_dog

MoneySaver241 said:

cloud_dog said:

BishopBrennon said:

Your pension will give you £8374/year if you stopped paying in now and retired at state pension age. But if you stay opted in this figure will increase (as the final salary is potentially higher and the careers average earnings increases more in service [the careers average portion grows by cpi +1.6% while you are part oof the tps, but only increased by cpi after you opt out/leave), but you'll also build up more in the careers average (1/57 per year so over £1200 extra annual pension per year). If you kept working for 29 more years in the same salary your pension would be £35k higher than if you left the scheme now.  

To put that is some sort of context for the OP, to obtain a pension of £8374pa using money/cash, you would need to have saved / investments worth over £200k!!!!

What do you mean by OP? How can I tell how much I have accrued since I started paying in? Or is this the 8K?

OP = Original Post(er)

In a Defined Benefits scheme you do not accrue money, you accrue a benefit a promise by your employer to pay you an amount each year.

Think of if this way....if you had a pension of £8k per annum and you lived for 30 years that would pay out £240k.  And this doesn't even take in to consideration the valuable index linking offered with your scheme, which would increase the amount paid out over 30 years quite considerably.

MoneySaver241

cloud_dog said:

MoneySaver241 said:

cloud_dog said:

BishopBrennon said:

Your pension will give you £8374/year if you stopped paying in now and retired at state pension age. But if you stay opted in this figure will increase (as the final salary is potentially higher and the careers average earnings increases more in service [the careers average portion grows by cpi +1.6% while you are part oof the tps, but only increased by cpi after you opt out/leave), but you'll also build up more in the careers average (1/57 per year so over £1200 extra annual pension per year). If you kept working for 29 more years in the same salary your pension would be £35k higher than if you left the scheme now.  

To put that is some sort of context for the OP, to obtain a pension of £8374pa using money/cash, you would need to have saved / investments worth over £200k!!!!

What do you mean by OP? How can I tell how much I have accrued since I started paying in? Or is this the 8K?

OP = Original Post(er)

In a Defined Benefits scheme you do not accrue money, you accrue a benefit a promise by your employer to pay you an amount each year.

Think of if this way....if you had a pension of £8k per annum and you lived for 30 years that would pay out £240k.  And this doesn't even take in to consideration the valuable index linking offered with your scheme, which would increase the amount paid out over 30 years quite considerably.

Thanks I had not realised this! Really appreciate your response. I think it’s safe to say I will be sticking with the TP scheme. 

BishopBrennon

MoneySaver241 said:.
So are you saying that my final pension could be around £43K p/a based on what I currently have £8K and the additional £35k that you mentioned?

Is the 1/57 of my current salary and that’s added to the pot each year? 

Sorry for all the qs!

Yes. Each year you're pension will increase by 1/57 of that year's salary -  that's how you end up with a pension that's based on your career average salary.

If you leave the scheme, your current pension value will still increase each year by inflation (cpi), but while you are still paying in the careers average portion increases by cpi + 1.6%. Over the course of a career that caan have a bigger effect than you might think. Say you had £5000 today. If that 5k increased by 1.6% (above inflation) each year for 30 years it would be worth (in today's money) £8049.73. 

You're final salary bit will be based on your highest salary in the final three years (so if you had 5 years service before they switched you into the career average, you'd get 5/60*whatever your final salary is).

£42k sounds would be a fantastic pension for most - but as mentioned you may still have part oof the mortgage to run and its still a considerable drop in salary. Also its likely to be reduced if you retire at 60 so be aware of that. 
MoneySaver241 said:. I think it’s safe to say I will be sticking with the TP scheme. 
Excellent news! 

Grabs39

MoneySaver241 said:

Grabs39 said:

There are calculators on the teachers pension scheme website which are quite useful.

You say your contribution is £7,931, but is that from gross income?  So you’ll pay 40% of that in tax if you don’t put make the contributions, as well as losing several times that in the value of the benefits you are in effect buying.

Ive always worked in the private sector, but my wife’s a teacher.  I’d give my back teeth for a pension as generous as teachers get.  We will be dependent on her pension for our plan to retire at 60, rather than 68 (though by the time we get there state pension age could rise even higher).

I’m yet to find a calculator that combines the career average and finally salary schemes. Which is why I’ve been so confused! Appreciate your advice. 

https://www.teacherspensions.co.uk/members/calculators/estimate-your-final-pension-value.aspx  I believe this one takes the 2015 changes into account.  

You asked earlier about the tax, but I think that’s been answered by other posters now.

thedr

I’m 31, will have 9 years service in September 2020 and I am planning to retire at around 60 years old (August 2049). 

You were in service (just) before 31 March 2012, and therefore you will get a slightly improved pension as a result of a recent ruling https://www.teacherspensions.co.uk/news/public-news/2021/02/government-response-to-the-public-service-pension-schemes.aspx

MoneySaver241

Am I right after reading this article that I will automatically be moved to the final salary scheme for the period between 2015 and 2022 and then have a choice when reaching retirement age / taking early retirement (potentially in 28 years time) for this period to be recategorised as career average if this makes financial sense to do so?