Teachers Pension phased retirement salary rules

bad_dad_3

I'm thinking of taking phased retirement when I am 60 in September. The rules say that I have to take a minimum 20% drop in salary for a minimum of 12 months (and take a maximum of 75% of my final salary benefits), and if my salary goes above that during the 12 months the pension is suspended. What I have been trying to find out from TP, and I cannot get a consistent answer, is what happens when I get my normal salary increment, or if I get a national pay award (both of which would happen during the 12 month period)? I have no control over either of those. Do I reduce my salary by more than 20% to take any possible rises into account? That seems like a strange approach, as I have no idea what the pay award might be, and I can't be sure exactly what the increment would be, although I could make an estimate.

bad_dad_3

As an update, I've found a document that says they take a cost of living rise into account, so any pay award would be fine. But I still don't know what would happen about my increment, which would take me over the 80%. It's really strange that I can't find any info on this, as surely many people must have done this?

zagubov

If you're worried about losing some pension if you earn too much after taking (or part of it), there may be a loophole worth investigating. It involves what's known as the one-day rule. Nobody is pushing this or can advise you to do it- it would be your responsibility to work out if it's the right thing to do.

If you retired before your September birthday you'd get an incomplete pension-. You could ask the TPS how much you'd lose by retiring a few weeks  early on an Actuarily Reduced Pension.

As long as you stay retired for even one day before your birthday you can start a new job with your employer, working as much as you like without your pension getting suspended/abated. For example if you chose the 31st August as your retirement your new contract must not start before the 2nd September or later.

This only works if you are on good terms with your employer and can trust them.

Your new job can be full-time or any fraction your bosses will agree to. You'll be on the new version of the pension when you start your new job as a new employee which may well recompense the loss from retiring a few days early.

I'm not recommending you do this (I can't, as, like virtually all posters here I'm not a financial advisor), but I did this myself about four years ago and it's made my post-retirement work much less bureaucratic than it could have been.

I feel there are enormous advantages to phasing out work and phasing in retirement. 

Everyone told me that you won't feel you're working much less unless you get your working week down to 0.6 or less. 

From my experience, that's probably right.

Good luck, whatever you decide.

Jaynishriya

zagubov said:

Your new job can be full-time or any fraction your bosses will agree to. 

Isn't it the case that if your income from TPS pension plus income from the TPS-eligible job - whether full-time or fractional - is greater than the salary of reference at retirement, the TPS pension will be subject to abatement?

https://www.teacherspensions.co.uk/members/once-retired/return-to-work.aspx

zagubov

Jaynishriya said:

zagubov said:

Your new job can be full-time or any fraction your bosses will agree to. 

Isn't it the case that if your income from TPS pension plus income from the TPS-eligible job - whether full-time or fractional - is greater than the salary of reference at retirement, the TPS pension will be subject to abatement?

https://www.teacherspensions.co.uk/members/once-retired/return-to-work.aspx

No, as long as you retire at least a day before your birthday, you will receive Actuarially Adjusted Benefits and as your weblink says:

"If you took final salary benefits and if you’re receiving Actuarially Adjusted Benefits, your pension will not be affected. "

There's then no need for the bureaucratic to-ing and fro-ing between your employer and the tax people. I did this and I was definitely not subjected to abatement.

I'm in England by the way and I found this loophole via a colleague in Scotland. Not totally sure if it applies in Wales or NI.

You need to find out how much your pension is adjusted by, which the TPS can tell you (if you give them enough notice).

Then you can work out it it's worth it for you. It may be tax-efficient if you can overpay into your new work pension. 

bad_dad_3

Thanks for your replies. My original question, after some digging around and questions to TPS is whether or not the "standard annual increase", which they apparently take into account when determining whether I break the 80% salary rule, includes the normal salary increment. I can't find any examples anywhere of anyone who has taken exactly a 20% cut in salary (the minimum reduction under the phased retirement rules)- unless someone is at the top of the salary scale, they will automatically break the 80% salary rule as they increment during the 12 month period.

zagubov

bad_dad_3 said:

Thanks for your replies. My original question, after some digging around and questions to TPS is whether or not the "standard annual increase", which they apparently take into account when determining whether I break the 80% salary rule, includes the normal salary increment. I can't find any examples anywhere of anyone who has taken exactly a 20% cut in salary (the minimum reduction under the phased retirement rules)- unless someone is at the top of the salary scale, they will automatically break the 80% salary rule as they increment during the 12 month period.

I couldn't find that information either which was why I identified the one-day pathway as my most secure way to work and earn as much as possible while receiving my (almost) full pension.

You've got the flexibility to consider this option but your employer may want you to retire in August 31st with a notice deadline of May 31st. You've got a bit of time to find an answer you're confident to follow.

I've known people who didn't research this until they were past their retirement age and then found working afterwards to be bureaucratic and financially costly.
Bear in mind that there will be little or no advice out there about how to maximise your income this way as it's not in anyone else's interests to provide info about this - apart from your own.

Good luck with whatever you decide.

bad_dad_3

zagubov said:

bad_dad_3 said:

Thanks for your replies. My original question, after some digging around and questions to TPS is whether or not the "standard annual increase", which they apparently take into account when determining whether I break the 80% salary rule, includes the normal salary increment. I can't find any examples anywhere of anyone who has taken exactly a 20% cut in salary (the minimum reduction under the phased retirement rules)- unless someone is at the top of the salary scale, they will automatically break the 80% salary rule as they increment during the 12 month period.

I couldn't find that information either which was why I identified the one-day pathway as my most secure way to work and earn as much as possible while receiving my (almost) full pension.

You've got the flexibility to consider this option but your employer may want you to retire in August 31st with a notice deadline of May 31st. You've got a bit of time to find an answer you're confident to follow.

I've known people who didn't research this until they were past their retirement age and then found working afterwards to be bureaucratic and financially costly.
Bear in mind that there will be little or no advice out there about how to maximise your income this way as it's not in anyone else's interests to provide info about this - apart from your own.

Good luck with whatever you decide.

I'm now thinking of doing this- the phased retirement was just too difficult for someone in my situation (I worked out I'd have to get my emplyer to suspend my increment). When you did it, did your employer have to do anything special like advertising the role, or was it just a case of ending your contract then restarting a day or two later? By the way, I found out far more information by looking at the employer's section of the website rather than the member's section!

Many thanks

zagubov

bad_dad_3 said:

zagubov said:

bad_dad_3 said:

Thanks for your replies. My original question, after some digging around and questions to TPS is whether or not the "standard annual increase", which they apparently take into account when determining whether I break the 80% salary rule, includes the normal salary increment. I can't find any examples anywhere of anyone who has taken exactly a 20% cut in salary (the minimum reduction under the phased retirement rules)- unless someone is at the top of the salary scale, they will automatically break the 80% salary rule as they increment during the 12 month period.

I couldn't find that information either which was why I identified the one-day pathway as my most secure way to work and earn as much as possible while receiving my (almost) full pension.

You've got the flexibility to consider this option but your employer may want you to retire in August 31st with a notice deadline of May 31st. You've got a bit of time to find an answer you're confident to follow.

I've known people who didn't research this until they were past their retirement age and then found working afterwards to be bureaucratic and financially costly.
Bear in mind that there will be little or no advice out there about how to maximise your income this way as it's not in anyone else's interests to provide info about this - apart from your own.

Good luck with whatever you decide.

I'm now thinking of doing this- the phased retirement was just too difficult for someone in my situation (I worked out I'd have to get my emplyer to suspend my increment). When you did it, did your employer have to do anything special like advertising the role, or was it just a case of ending your contract then restarting a day or two later? By the way, I found out far more information by looking at the employer's section of the website rather than the member's section!

Many thanks

It was more like the latter and the bureaucracy was minimal.