USS v. TPS Pension

terkerp

Hello,

I have seen all the threads on here around the relative merits of TPS and USS pension schemes. I switched to TPS this after just over 10 years of paying into USS.

I'm currently in the process of transferring my accrued USS pension to USS. I have a couple of questions in this regard.

First, according to USS I have built up an earned annual pension of around GBP7500.00 up to this point. But TPS have estimated that I would receive earned annual pension of GBP230.00. Should I assume that TPS have made an error in calculation here?

Second, I'm not clear what happens to the investment builder portion of my USS pension upon transfer.

Thanks for your help!

[Deleted User]

Are you certain your figures are correct? £7500 and £230?

Universidad

Sounds like something is awry somewhere, but it's hard to guess without more information. I will say that it will have been hard to earn £7500 of annual pension with USS if you joined in ~2013, but certainly not impossible if your salary has consistently been near or above 60,000. If it's been markedly lower than that, then 7500 doesn't track for 10 years membership.

It's worth noting that although TPS is in most respects a better pension scheme than USS (even if the USS restoration goes through next year) it is not necessarily in your interests to transfer to the new scheme - you've just got to see how the math works out for you.

Probably goes without saying that swapping 7500 per year for 230 per year doesn't sound great, to the point that it does sound wrong, but I don't know where the numbers have come from, so I don't know where they're wrong.

I will say that paying in even a single lump sump of 7500 would probably net you more than ~230 per year of Added Pension. (My wife just bought 500 pounds of added pension for less than this.)

Marcon

terkerp said:

Hello,

I have seen all the threads on here around the relative merits of TPS and USS pension schemes. I switched to TPS this after just over 10 years of paying into USS.

I'm currently in the process of transferring my accrued USS pension to USS. I have a couple of questions in this regard.

First, according to USS I have built up an earned annual pension of around GBP7500.00 up to this point. But TPS have estimated that I would receive earned annual pension of GBP230.00. Should I assume that TPS have made an error in calculation here?

Second, I'm not clear what happens to the investment builder portion of my USS pension upon transfer.

Thanks for your help!

No. Either USS or TPS could have made an error, so check with both.

Universidad

terkerp said:

I'm not clear what happens to the investment builder portion of my USS pension upon transfer.

Actually, just a thought - how much is your investment builder portion worth? You can decide with USS to transfer out either Retirment Income Builder or Investment Builder, or both. Is it possible the TPS quote is just for the investment builder amount?

terkerp

Thanks all for your responses. I really appreciate your help.

First, I've double checked the USS numbers and here the total deferred pension at date of leaving is 7498.42/year. This might seem higher because I actually began paying in October 2011 and paid an extra 1% of my salary towards the pension throughout much of that period. My salary was between 40-50k throughout that period. Would that be a reasonable way of arriving at that figure? Or should I be worried that USS have made an accounting error?

Second, my investment builder is worth 4229.49.

Third, I have queried the figure of 233.00 that TPS have given me for their estimated acrrued annual pension in the career average arrangement. I'm still waiting to hear back.

But I have a further query if you don't mind: is it, as a rule, always advisable to transfer USS to TPS if given the chance? I'm sure that TPS have made a simple accounting error here, but I am also having second thoughts. 

Thanks all again for your help.

Universidad

terkerp said:

I've double checked the USS numbers and here the total deferred pension at date of leaving is 7498.42/year. This might seem higher because I actually began paying in October 2011

That seems like it could be a plausible amount. You will have been paying in to a 1/80 care scheme for the first 5 years, and a 1/75 care scheme up until April 2022 when it will have changed to a 1/85 scheme. 

I did a little bit of back of the napkin math, and if you were earning above about 45K on average from 2011-2023, you'd probably be close to the 7.5K figure after you account for inflationary increases over that time. Same ballpark, anyway.

As an aside, you joined the scheme literally the very month they closed the final salary scheme to new members. Sometimes things are timed badly, nothing that can be done now!

terkerp said:

is it, as a rule, always advisable to transfer USS to TPS if given the chance? I'm sure that TPS have made a simple accounting error here, but I am also having second thoughts.

No, absolutely not.

TPS may be the better pension of the two overall, but there is no guarantee that the transfer value USS offer you will buy an equivalent amount of pension in TPS.

Furthermore, USS has a lump sum and TPS does not (at least not automatically, and the commutation rate is not good if you want one). And TPS may have a higher retirement age than your USS benefits (depending on your state pension age).

So even if a transfer to TPS could buy the same annual pension, it might not be worth as much as staying in USS.

There is almost no reason* not to keep the USS pension, and start accruing the TPS pension on its own merits. Maybe transfer the Investment Builder section over if you want a head start, and this ought to vest your TPS pension immediately which might be good for peace of mind.

The only significant disadvantage of keeping your USS pension in deferment is that it's not fully inflation protected.

*Well, one reason would be if TPS somehow offered you a significantly larger pension than you had in USS, but I wouldn't expect it.

terkerp

That all makes perfect sense. In fact, I made a further error: I joined USS August 2011 and did make that final salary deadline.  In fact, I had some bad advice from an HR rep at my first job lecturer post in 2010 who told me not to bother joining USS given I was only on a 9 month contract. If only I had that in writing!

In any case, I shall await some clarity from TPS valuation. Really grateful for all of your help!