Is it worth buying £250 Teachers additional pension or pay into Private Pension

harri_dav

I hope someone can help. I'm 41 and I currently have £2.5k in an old ISA that’s doing nothing. I’m considering putting this money into my pension. I have a Teachers Pension, started in 2005 but I only have 4 years service as I’ve always been part time. I don’t pay tax on my employment. I was looking at buying additional pension but to add £250 it would cost £2.5k lump sum. My job has no security but I’ve lasted 16 years in this post so far. Is this worth it? What would a £250 contribution be worth by retirement age? I also have a stakeholder pension which is currently valued at £12k, but I only pay £50 per month in that and the forecast is depressing.  Would it be better to put the money in there? I’m on course to have full state pension and no debts to my name. My husband has a healthy pot building up and he'll have the state pension too. Any advice would be appreciated. 

MDMD

Sounds like a bargain to me, for £2,500 cash now you get £250 guaranteed and risk free (presumably will be indexed linked) paid each and every year for the rest of your life from the day you retire.

harri_dav

Sorry to sound dull but is that what it means? I was frantically trying to find a calculator to tell me how much this would grow by the time I retired. 

Dazed_and_C0nfused

This is what the Teachers Pension website has to say,

Additional Pension is index-linked, which means that the value of extra pension increases in line with cost of living rises. This indexation is applied every April from the point the election is accepted (deductions from salary method) or payment is received (one-off lump-sum), and is set at the same rate as used for the annual Pensions Increase applied to public service pensions.

https://www.teacherspensions.co.uk/members/working-life/paying-in/increasing-your-pension/additional-pension.aspx

zagubov

It's potentially very good value. It's not odd or unusual for retired teachers to live into their late eighties and beyond.
The website has a calculator and the website says 
Once bought, the pension is revalued up to the date of retirement.
and
It’ll be index-linked both while you’re working and after you retire.

I recommend you phone (or email) the pension agency and ask if this means that the pension may have increased to more than £250 in the twenty-odd years time it'll take you to reach retirement because it seems to be saying that on their website.

If you haven't registered with their website, I'd recommend you get straight onto that as it's very helpful and informative.

Retireinten

I'm in the LGPS so a different scheme. But I'd check out the impact of taking your teachers pension early, on your additional pension. In all likelihood, this will be subject to actuarial reduction (as for the LGPS). Still not necessarily a bad deal as its being paid for longer, but it's worth knowing so you can plan any reductions in if you decide to access your pension early.

Also, worth checking if this converts to a widows pension or not.  I don't think it does for the LGPS so probably won't for the teachers.

harri_dav

Thanks for your replies. Am I right to think that because being part time and a non tax payer being my wage is roughly £5k a year, that I won’t have any tax relief on this lump sum that I’ll be paying? 

Dazed_and_C0nfused

Yes.  Unless you have a lot of other taxable income it won't save you any tax.

But that doesn't mean it's a bad idea, just not as good as it could have been