Additional Teachers Pension

Jamesl1392

I am 40 years old and am employed as a part time teacher (with 13 years service). My aim is to retire ar around age 57 (around the same time as my partners retirement). I currently have about £10,000 in a Sipp and £14,000 in a Lisa, which I am paying £400 pm into.

If I did  retire at 57, I can probably manage on my husbands income and other savings until my Lisa kicks in at age 60.

The Normal Pension Age (NPA) for my Final Salary portion of my pension is also age 60 (I have now automatically transferred to the Care pension which has an NPA of age 68.

I've read the guidance but don't understand it all. My main questions are:

1. Is it worth continuing to pay £400pm in a Lisa (which seems to work out better than the Sipp despite the slightly older age needed to access it), or would I be better off putting more into my pension?

Part of the reason for paying into the Lisa is to have a lump sum available that will go towards mortgages, weddings etc for my two children who will be 19/22 years old by then. 

2. Am I right in understanding the maximum additional pension I can purchase is £7100 each tax year. Also is there a maximum overall amount I can put in? 

3. Are any additional payments kept in a separate pot, that can be accessed at a different age to my main pension? 

It seems that if I did pay a lump sum it would take about 10 years, before I would receive more that the lump sum that I put in. Although I could live to 100, it does seem that age 78 is quite old to start actually realising any benefit. 

4. How does faster accrual work and should I consider this as well?

I think that's about it for now! Any suggestions would be appreciated! 

 


 

OldBeanz

2. There is not a maximum you can pay in. But you are in a net pay pension so the limit of tax relief you can claim is limited to your annual income tax bill.
3. AVCs are kept separately and can be drawn separately. The rest f the options are held as one. You need to consider inflation in your calculations and as a teacher you have a good chance of living to 88.
4. Faster accrual allows you to pay extra to draw your pension earlier. 

hugheskevi

Jamesl1392 said:

I am 40 years old and am employed as a part time teacher (with 13 years service). My aim is to retire ar around age 57 (around the same time as my partners retirement).

Be aware that minimum pension age is increasing. The policy intent is for the minimum age at which you can access a pension to increase to be 10 years behind your State Pension age. Your State Pension age is 68 and could increase further.

If I did  retire at 57, I can probably manage on my husbands income and other savings until my Lisa kicks in at age 60.

You would want to be tax efficient, and use your Personal Allowance if possible. That might suggest drawing some of your SIPP (if possible due to minimum pension age) in these intervening years before DB pension starts.

The Normal Pension Age (NPA) for my Final Salary portion of my pension is also age 60 (I have now automatically transferred to the Care pension which has an NPA of age 68.

Be aware that a legal judgment means that you will be given a choice of remaining in your pre-2015 pension for the period 2015-22.

1. Is it worth continuing to pay £400pm in a Lisa (which seems to work out better than the Sipp despite the slightly older age needed to access it), or would I be better off putting more into my pension?

LISA is fine, but you can't put much in, the limit is frozen in cash terms and you can't contribute after age 50.

The SIPP will work out the same for funds drawn out on which you do not pay tax (you can take £16,667 from the SIPP each year without paying tax if you have no other taxable income).

2. Am I right in understanding the maximum additional pension I can purchase is £7100 each tax year. Also is there a maximum overall amount I can put in?

The Added Pension limit refers to the amount of pension per year which you can purchase. The cost of purchasing the maximum amount of Added Pension will be high - probably around £100,000 so the limit shouldn't be an issue for you.

3. Are any additional payments kept in a separate pot, that can be accessed at a different age to my main pension?

There are various different types of additional pension, which you can read about here. AVCs are separate (very similar to your SIPP in most regards) but the other enhancements are part of your Teacher's pension.

It seems that if I did pay a lump sum it would take about 10 years, before I would receive more that the lump sum that I put in. Although I could live to 100, it does seem that age 78 is quite old to start actually realising any benefit.

You are exchanging capital for a guaranteed income, and can choose whether it also has survivor benefits. The price is reasonable in general (ie compared to returns that might be expected taking risk with capital), and very good compared to the cost of securing an income commercially. If you want more guaranteed income, it will almost certainly be the best vehicle to provide that. If however you want flexibility or to leave an inheritance it is not good in comparison to other options.

4. How does faster accrual work and should I consider this as well?

It is described at this link.

Each year, you build up 1/57 of your income. So if you earn £20,000 you build up £351 of pension. This is revalued by CPI+1.6% up to retirement whilst you are in service, and by CPI if you leave.

If you purchase Faster Accrual you accrue pension at the rate of 1/45, 1/50 or 1/55 instead for the period during which you are paying a higher contribution rate.

Compared to Added Pension, Faster Accrual is good if you plan to work to retirement due to the higher in-service revaluation (pricing will be based on an assumed split of time remaining to Normal Pension age into in-service and out-of-service revaluation, so if you stay until retirement you do well, leave earlier than assumed and you don't do so well).

zagubov

Not trying to hijack the thread but just a heads-up that more people will be looking here now that the TES has closed their forum.