Guidance on rollback choice. Teachers pension or SIPP

22225

Hello
I am part of transitional scheme in Teachers Pension. I got my Rollback Choices Letter. Between 2015 and 2022 I paid in for extra pension both via Faster Accrual and also Additional Pension. Now I can choose whether to get most of the money back in 'compensation' or keep it in the teachers pension. I can decide to have it in Final Salary at 60 years or Career Average at 68+ and I can decide when it comes to retirement.

My question is whether to take the compensation and invest it in an ISA/SIPP or whether to keep it in the teachers pension scheme. I've done a few basic calculations but I'm not sure if my assumptions are correct. Would anyone mind sharing their opinion?

From what I can gather, if I took the compensation and invested it and got 4.5 per cent compounded, then at 60 ( when I can take my final salary pension) the figures are very similar. I know that teachers pensions are a great deal, but am I correct in my conclusion that when you accrued pension through working then accruing the pension is very cost effective, but in contrast, when you buy additional pension (eg without the so-called employers contributions) it is not particularly a great deal -well I mean it has sort of been actuarially worked out to be similar to an invested SIPP? So not really much difference?

Please can you share your thoughts:

I paid into Faster Accrual:
For this I can have £99 per annum at 60 years (FS) or £92.55 at 68+ state pension age CARE ( I can decide at retirement)

OR

Compensation given to me of £1,229.78.

THEN:

Additional pension:
£354.33 FS at 60/ £500.00 at 68+ p.a.

OR

Compensation now of: £4812.67.

What are your thoughts??? Is it really just about the value to me of having the Teachers pension guaranteed? 

The teachers pension FS goes up by CPI and the CARE goes up by CPI +1.6.

Additional pension and faster Accrual does not increase the lump sum.

Any thoughts??????
Thanks

kpk2000

I had similar but the figures were a bit higher. I chose for it to be in the FS at 60 scheme for 2 reasons rather than compensation/repaid contributions.

Firstly, I had paid the money already as part of retirement planning so keeping it in TPS would not not affect me now and I would get the money eventually when I retire as planned. 

Secondly, I am planning to leave teaching at or before 60 so moving it from additional pension in the 68 CA scheme to the FS at 60 was a bonus for me as I can get the money earlier.

For clarity, I am investing in a SIPP and ISA to cover me from 55-60 as I hope to leaving teaching at 55 so the extra money from 60 will be handy. I paid into the 68 add pension knowing it would be reduced when I took it early so having the option of moving it to the 60 scheme was a nice bonus IMO.

22225

Thank you for taking the time to comment. I do want to build up funds for 60-68. But I don't know whether to put it in a SIPP /ISA or keep it in the scheme. See one people say the stock market is in a bit of a bubble right now and that the next 15 years could be more of a bear market with lower returns. So then the teachers scheme that at least beats inflation looks more competitive.

kpk2000

I think my final choice was I had spent the money already and never expected a refund of the contributions so better to keep it in the scheme. 

I make isa and sipp contributions now instead of paying for any further additional pension so I can retire earlier than 60. Remember that you can take TPS earlier than 68 currently so no real need to plan unless you want more income. While there is a penalty for taking early it is because you get more years of payments so should work out even over an average lifetime.

Pipthecat

ISA becomes attractive if the rest of your finances are dire and you have no emergency savings.  Assuming that's not the case then keeping it in the scheme seems sensible

22225

But would people agree that the teachers scheme pension are equally good WHEN the additional pension contributions have been funded solely by the teacher? Eg vanguard SIPP versus teachers pension defined benefit.i know they are different but in terms of value for money they are similar correct???