Teachers Pension

Time2Go_25

My mum is about to retire from her job as a teacher, she is 64 and is still part of the final salary scheme. It seems to be possible to convert some of her pension into a lump sum but we are wondering if it is possible to go the other way and convert the lump sum into monthly payments and if so would that be a sensible/stupid thing to do as she has no need of a large lump sum.
Many thanks

Brynsam

From TPS's website: 

We’re often asked to explain whether members are eligible to receive a lump sum. If you’ve final salary service that includes service before 1 January 2007 you’ll receive an automatic lump sum when you take your final salary benefits.

If you only have final salary service after that date, or have any career average service, you’ll not receive an automatic lump sum when you take your benefits. However, you can choose to give up part of your pension to receive a lump sum. Your pension will be reduced for your lifetime and you must make your decision when completing your application form. For each £1 of pension that you give up you’ll receive £12 of lump sum.

zagubov

If she was on the old scheme she may have an automatic Tax Free Lump Sum. I've never heard of any option of giving it up in exchange for an enhanced pension, only options for increasing it. Being able to do that would be very poor value for the scheme but better value for many pensioners due to the poor commutation rate plus current low interest rates. It starts as three years pension in one go, but obviously the taxman doesn't touch it.Teachers tend to reach their late eighties in retirement.

She could simply ask the TPS by logging on to the site and leaving the question or telephoning them during working hours.
 
We can't advise whether it would be in her interest to reduce that or give that up if that was possible; it depends on her state of health, existing savings etc. It may be that she could just settle for the minimum lump sum What I should mention is she needs to be totally certain she's chosen the right amount as it can't be re-negotiated once she submits the form.

hugheskevi

pdel61 said:

My mum is about to retire from her job as a teacher, she is 64 and is still part of the final salary scheme. It seems to be possible to convert some of her pension into a lump sum but we are wondering if it is possible to go the other way and convert the lump sum into monthly payments and if so would that be a sensible/stupid thing to do as she has no need of a large lump sum.

The term for this is 'reverse commutation' and yes, it is possible in some circumstances (although these may be limited to situations where paying a lump sum is not permitted, rather than available by member choice).

There doesn't seem to be much on the Teacher's pension website about it, just this link to the actuarial factors.

Be aware that the exchange rate for changing lump sum into pension will be far less generous than the 12:1 factor used to change pension into lump sum - probably more like 20:1.

cobson

The consensus last time this was asked is that it isn't possible to do this voluntarily:
https://forums.moneysavingexpert.com/discussion/5348832/teachers-pension-question
There is a document detailing the inverse commutation rates, but I think it only applies to a few specific circumstances:

https://www.teacherspensions.co.uk/-/media/documents/member/documents/factors/retirement/lump-sum-conversion-guidance-july-2019.ashx?rev=44b62116e15d4d62b0bc46c82a8e6868&hash=C40228DEB6A532AC1B81D589F8D8D61F

VXman

I'm pretty sure that is not possible with the teachers final salary pension. I suppose one way around it would be to use the lump sum to buy an annuity from an external organisation.

Time2Go_25

thanks to all who replied, I think I'll get her to just take the lump sum and then re-invest it.

zagubov

It sounds like it is the kind of question they could answer easily. The Teachers Pensions contact details are here, and they are open now  (4PM) and for the next few hours.