What will teachers pension increase by this year? 10% CPI?

hugheskevi

german_keeper said:

That's interesting, I wasn't aware of that inflation "protection" in TPS. Not sure about other PS schemes but there is no such protection (to the best of my knowledge!) in the Civil Service Classic scheme.

There is I believe some sort of inflation protection with the Premium scheme, which goes back 13 years. But when I made my decision in 2002 (ish) in my situation it seemed the guaranteed lump sum in Classic was roughly similar to the better 1/60 accrual in Premium, so the extra 2% contribution didn't seem worth it. I have to admit to not picking up on the inflation protection with Premium at the time, but even if I had I don't think I would have expected the real terms pay cuts from 2010 onwards so would have still made the same decision.   

There is some protection in the Classic system, but it is very limited. It requires your full-time pensionable earnings to go down (remaining the same does not count) and even then only covers the last 3 years. That usually only happens if a pensionable allowance gets removed.

Premium is much more comprehensive, looking back 13 years and not requiring a salary reduction in cash terms in order to apply. Given that for those who have not been promoted their inflation-adjusted best years are about 13 years ago, I suspect many are blissfully unaware that their pension is reducing as those best years drop out of the final salary calculation. Fortunately it is very unlikely they will ever find out, so they will never know what they had and lost. Although I do know some people in this position switched to Partnership to lock in those years in their deferred pension award

Andy_L

german_keeper said:

Andy_L said:

german_keeper said:

I have read a couple of threads about this kind of thing and I must admit once or twice I lost track a little bit and didn't quite follow some of the thinking. So apologies if I am missing something obvious.

Regards AR as I understand it the factors are set at a level that should even out assuming average life expectancy. So the main consideration is do the numbers add up and how keen are you to retire/partially retire. Slightly different for me as I took PR when I was 54 due to caring responsibilities so didn't do any detailed affordability calculations at the time. I think it can also be quite beneficial to people who may end up with LTA issues.

Regards CPI increase to pension I think there are differences between current CARE accrual and any Final Salary entitlement. For CARE that will be increased by CPI at accrual level so that seems to me to be essentially the same. As I understand it the NHS scheme increases at accrual by CPI + 1.5% so, at least from a purely financial point of view, that seems to be a tick in the box for carrying on working. 

Regards Final Salary entitlement I would think the big question is do you expect payrises at or above inflation. Pension in payment will increase by CPI, pro rata if not in payment for the full year. Your FS accrual will effectively increase by whatever your FS increases by.    

As I mentioned not something I have necessarily got my head round or thought too deeply about but that's my two penn'orth, hope it helps

The teachers pension (as well as some/most/all? other PS schemes) uses the better of the final years salary or an inflation adjusted average of the best consecutive 3 years in the last decade of service as the salary used for calculating FS benefits

https://www.teacherspensions.co.uk/members/faqs/planning-retirement/calculations.aspx

That's interesting, I wasn't aware of that inflation "protection" in TPS. Not sure about other PS schemes but there is no such protection (to the best of my knowledge!) in the Civil Service Classic scheme. I took mine in 2019 and I dread to think how much more it would have been with some sort of inflation protection since 2010. Unfortunately no promotion for me since 1993 so my final salary was entirely dependent on pay rises, or should I say pay "awards".

There is I believe some sort of inflation protection with the Premium scheme, which goes back 13 years. But when I made my decision in 2002 (ish) in my situation it seemed the guaranteed lump sum in Classic was roughly similar to the better 1/60 accrual in Premium, so the extra 2% contribution didn't seem worth it. I have to admit to not picking up on the inflation protection with Premium at the time, but even if I had I don't think I would have expected the real terms pay cuts from 2010 onwards so would have still made the same decision.   

CS Premium (the 2002 scheme) has it as does the NHS