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

Lastonestanding

Silvertabby said:

Note that the triple lock benefits everyone, not just pensioners, by increasing the amount of their future State pensions.

Next April, if the CPI forecast is accurate, civil service workers will see their CS pension accruals increase by over 10%, and their State pensions accruals by at least 9%.

It's said that CPI/RPI wage increases are inflationary, so we cannot have them.
Using the same logic, pension rises are also inflationary 

NedS

Lastonestanding said:

Silvertabby said:

Note that the triple lock benefits everyone, not just pensioners, by increasing the amount of their future State pensions.

Next April, if the CPI forecast is accurate, civil service workers will see their CS pension accruals increase by over 10%, and their State pensions accruals by at least 9%.

It's said that CPI/RPI wage increases are inflationary, so we cannot have them.
Using the same logic, pension rises are also inflationary 

Yes, but pensioners vote, and you can be sure they won't vote Blue if they don't get their 10%

It would be political suicide not to give the standard CPI uplift in the one year CPI is through the roof.

Silvertabby

Lastonestanding said:

Silvertabby said:

Note that the triple lock benefits everyone, not just pensioners, by increasing the amount of their future State pensions.

Next April, if the CPI forecast is accurate, civil service workers will see their CS pension accruals increase by over 10%, and their State pensions accruals by at least 9%.

It's said that CPI/RPI wage increases are inflationary, so we cannot have them.
Using the same logic, pension rises are also inflationary 

RPI (as it was then) increases were way higher in the 1970s/80s.  But they were applied in full to public sector pensions. 

Korkyb

I had planned on taking my NHS pension next year when I would be almost 58. (I'll take a fair hit due to actuarial reduction but as I've got 36ish years in & a decent salary I decided I could afford to take my pension early).

A few months ago when it was clear that the CPI rise next year was going to be "larger than normal" I decided to move my plans forward and am now retiring in September.

I'll have to pay / lose an extra 4% through actuarial reduction compared to going next year but my thinking was / is that the CPI uplift next April (of which I should get around 50%) will go a fair way to offset this & as a bonus I will also get my pension for 12 months longer.

If my crystal ball had been functioning properly I would probably have taken my pension at the beginning of this April to get the full CPI whack next year.


I'm very much looking forward to being (? semi) retired before 56 but planning on still working around 12 (ish) hours per week just to reduce the amount of DIY her indoors makes me do at home.

drummersdale

Hi @Korkyb that’s my thinking too - am going partial next month at 59 so will lose a small % through actuarial reduction but like you have offset that with the CPI uplift for next year.  Whether it’s a sound strategy I don’t know as everything else is increasing through inflation but am assuming that inflation will decrease eventually whilst the pension increase will be permanent.  And yes the added bonus of going a little earlier - although I’ll be doing 18.5 hours a week for a couple of years.

german_keeper

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

drummersdale

Hi @german_keeper I don’t think you’ve missed anything I think it’s more a personal decision around feeling ready for full or partial retirement and do those all important numbers add up.  The possible large CPI uplift next April is just a timing issue for me.  I think there is zero chance of CS salaries rising anywhere near inflation,  2-3% maximum I suspect. No suggestion from either of the candidates for PM that they have any thoughts on raising salaries in the public sector nor rowing back on the money saving idea of getting rid of 91,000 civil service posts either.

Andy_L

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

saucer

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

I think you are spot on there. Of course the CPI + 1.5% is only when you are contributing and for the CARE bit. If a lot of your pension is in the 1995 or 2008 final salary scheme you are only getting the real impact of the CPI uplift after retiring. 

german_keeper

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.