Teachers Pension

Bjstanbridge

Hello
I know that there have been many posts before on teachers pensions but I cannot find one that deals with a case like mine.

I am currently 60 and my teacher pension allows me to retire at 60 as I am on the old final salary scheme. However, I came into teaching quite late and I currently would only get a quarter pensions as I only have 25 years service.
I want to continue to work until August 2023 when my husband retires but I understand that in April 2022 any pension that I accrue will be in the new career average scheme.
As the career average scheme will have a normal retirement date of 67 I think that I will get penalised by taking the amount paid in approximate £23000 into the career average early.

Is that correct?

The teachers calculator on the pension site does not appear to do career average.

Dazed_and_C0nfused

As the career average scheme will have a normal retirement date of 67 I think that I will get penalised by taking the amount paid in approximate £23000 into the career average early.

Why do you think you will be penalised for taking the CARE element early?

There isn't normally any penalty for taking the pension early, the amount accrued will be actuarially reduced to reflect the fact that you want it to be paid for a longer period i.e. you get the pension paid for say an extra 5 years (age 62-67) so it is reduced to factor in the longer period it will be paid for.

Are you still accruing service under the final salary rules at the moment?

cobson

There is some guidance on its page:

Factors and Guidance | Resources | Teachers' Pensions (teacherspensions.co.uk)

From the Latest Scheme Factors document, someone taking early retirement at 60 from the career average scheme with an NPA of 67 would have to multiply that portion of their accrued pension firstly by the standard reduction (0.94 in this case) then by the figure in table ER7 (0.779 in this case) for a total reduction factor of 0.73226

Note that at retirement you will be shown the figures for counting your pension accrual from April 2015-2022 in both the final salary scheme and the career average scheme and you will be asked to choose which scheme you want to count them in.

Bjstanbridge

Dazed_and_C0nfused said:

As the career average scheme will have a normal retirement date of 67 I think that I will get penalised by taking the amount paid in approximate £23000 into the career average early.

Why do you think you will be penalised for taking the CARE element early?

There isn't normally any penalty for taking the pension early, the amount accrued will be actuarially reduced to reflect the fact that you want it to be paid for a longer period i.e. you get the pension paid for say an extra 5 years (age 62-67) so it is reduced to factor in the longer period it will be paid for.

Are you still accruing service under the final salary rules at the moment?

Hi Dazed
Yes I am still accruing pension in the final salary until April 22

My understanding is that I will have then have 17 months in the career average scheme or if its better for me which I doubt the average scheme from 2015

cobson

Note that you also have the option of taking your final salary pension at 60 and your career average pension at 67, which will then be unreduced.

hyubh

Bjstanbridge said:

My understanding is that I will have then have 17 months in the career average scheme or if its better for me which I doubt the average scheme from 2015

While the normal pension age is higher, the 'accrual rate' is much higher too (1/57 not 1/80, though admittedly there is no standard lump sum). At the end of your career, the general expectation will be you won't get much (if any) acceleration in your pay, in which case being CARE not final salary is not a loser, especially given the TPS' active member 'revaluation' is above inflation (i.e. each year you remain an active member in the CARE scheme, previous CARE years increase in value in real terms).

If it ends up being only 17 months, the calculation gets more complicated, but it won't make that much of a difference. Given the different benefit structures, you may end up with a higher not lower pension that otherwise, even with the actuarial reduction, the 'hit' being on a slightly smaller lump sum instead.

AlanP_2

cobson said:

Note that you also have the option of taking your final salary pension at 60 and your career average pension at 67, which will then be unreduced.

Can they be split like that in the TPS? They can't in the LGPS.

cobson

AlanP_2 said:

cobson said:

Note that you also have the option of taking your final salary pension at 60 and your career average pension at 67, which will then be unreduced.

Can they be split like that in the TPS? They can't in the LGPS.

If you retire early from the final salary scheme (i.e. aged 55-59) then you must also take the career average pension as well, but if you take the final salary pension at or after NPA then you don't have to also take the career average one.

hyubh

AlanP_2 said:

cobson said:

Note that you also have the option of taking your final salary pension at 60 and your career average pension at 67, which will then be unreduced.

Can they be split like that in the TPS? They can't in the LGPS.

From the TP Retirement Guide, p.13:

'If you’ve more than one NPA you can take all of your benefits once you reach the first NPA providing you are no longer in pensionable employment but any benefits with a later NPA will be reduced. Alternatively, you can choose to wait and apply for the benefits with a later NPA once your reach the appropriate age.'

Link's here, PDF itself doesn't seem to have a static link: https://www.teacherspensions.co.uk/members/planning-retirement.aspx

(I've been corrected on this before for the same reason )

Dazed_and_C0nfused

It's quite possible the career average scheme will give you a larger pension for the 7 year remedy period even with an actuarial reduction.

Looking at teachers pension site you have been accruing 1/80th (with PCLS lump sum) under final salary. 

With the career average scheme you would be accruing 1/57th plus it has an annual inflation addition.  But no lump sum.

So ignoring the inflation addition one years service earning say £30k will give you the following,

Final salary = £375 pension + £1,125 lump sum

CARE scheme = £526 + £0 lump sum

So you need to look at the real figures when you retire but if you aren't in desperate need of the lump sum from the 7 year remedy period then opting for the CARE scheme may be a better choice financially even if the £526 has a small actuarial reduction. 

The lump sum is a one off whereas the pension could be in payment for 30+ years.

Also, with 25 years service you would get 31.25% as a final salary pension (25/80ths)

I currently would only get a quarter pensions as I only have 25 years service

hugheskevi

Bjstanbridge said:

I am currently 60 and my teacher pension allows me to retire at 60 as I am on the old final salary scheme. However, I came into teaching quite late and I currently would only get a quarter pensions as I only have 25 years service.
I want to continue to work until August 2023

What are you doing with the old final salary scheme with Normal Pension age of 60 between now and August 2023?

If you do not claim it, what happens to the pension money you have chosen not to draw? Would you be better off with Partial Retirement?