Transfer in from NEST to Teachers Pensions

Vicky2020

Hello all,

I would really appreciate your help.

I'm 40 years of age. I have a small pension pot of £7000 with NEST for a job that I have since left. I have started a new public sector job (which I intend to stay in until I reach retirement) that has enrolled me into the Teachers Pension Scheme. Because I know the Teachers Pension Scheme is a good scheme I decided to transfer the £7k into it. I made a transfer request. This resulted in the following reply from Teachers Pensions:

We have received the info from NEST to calculate the approx accrued earned pension you would receive if you decide to transfer your previous pension into the Teachers Pension Scheme (TPS).  We have calculated that you would receive an estimated accrued earned annual pension of £373 in the career average arrangement of the TPS payable from your state pension age. If you decide to complete the transfer any extra accrued earned pension will count towards personal and dependant benefits that will be increased each year by the relevant treasury order factors. 

My question is, does the £373 increase each year in line with my other contributions into TPS? Does this sound like a reasonable accrued earned annual pension amount for £7000, and is it worthwhile proceeding with the transfer? Would you recommend completing the transfer or leaving the NEST pot separate? 

Any help and direction greatly appreciated. Any more info to make sense of how this has been calculated would also be appreciated. 

MX5huggy

Active members of the TPS CARE scheme pensions are revalued by CPI + 1.6% each year. Deferred members (ie those that have stopped contributing) and retired members the revaluation is just CPI. 

I can’t find which is used for transfers in quickly but it doesn’t matter so much one is a good offer one is a great offer. 

I would and did do it (to LGPS). Do you have any other pensions? It’s a one chance offer and you can build up the pension out side TPS later if you wish. 

Vicky2020

Hello, thanks for your answer. I wasn't aware that TPS is a CARE scheme, are you certain? I appreciate your advice, so it is definitely a better option to transfer this 7k from NEST into TPS in your opinion?

Unfortunately I cannot locate my other work place pensions. The problem is that any PAYE work I have completed in the past was with multiple recruitment agencies and in temporary positions. I have tried to locate my work place pensions during this period but every pension scheme has said they cannot find my details. I am still trying to locate any original pension documents with ref numbers and old payslips, many payslips were online and I cannot get access to them. I thought at least transferring this £7k in to Teachers Pensions might give me a boost, I just didn't understand if £7K turning into an estimated accrued earned annual pension of £373 in the career average arrangement of the TPS payable from state pension age was good or not. 

LHW99

As MX5huggy says that £373 pa will revalue each year.

For finding old pensions, have you looked at the suggestions here?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/tracing-and-finding-lost-pensions

Universidad

Vicky2020 said:

I just didn't understand if £7K turning into an estimated accrued earned annual pension of £373 in the career average arrangement of the TPS payable from state pension age was good or not. 

It's not great, in my opinion, but there are pros and cons.

Since you're 40, the normal pension age for you is 68. So there are 28 years for that 7000 pounds to be invested as a pot of money if you leave it in a DC pension scheme. Assuming relatively conservatively that you get returns on average 3% above inflation each year, it would be worth about 16000 in real terms around the time you're 68.

You never know how much you'll take out of a DB pension, because you don't know how long you will live. But assuming you live to be 84, then you will claim a TPS pension for 16 years if taken from 68 (and the maths will work out similar if you take it early, as a lower amount will be taken for longer)

If you take it as TPS pension, then it will be worth 373 per year, so over 16 years that's just under 6000 pounds total. This assumes that you don't stay in TPS. If you did stay in TPS (all the way until age 68), then that will be worth closer to 600 pounds, due to the annual revaluation 1.6% above CPI. So that would be approx 9500 that you would get out.

So overall, you would probably do better in purely financial terms if you did not take the transfer.

This is not to say that TPS is a bad pension - far from it, it is one of the best. But the transfer value they have offered you does not offer the same value proposition as your regular membership.

However, this is not a decision to be made in purely financial terms. Taking the transfer will a) immediately vest your TPS pension, meaning that even if you leave within two years you have some guaranteed TPS pension and b) offer the closest thing to certainty about that part of your retirement income.

There's quite a lot of value in knowing that, come what may, you'll get X amount per year in retirement, rather than "if the markets perform as expected then maybe i'll be able to retire in 2053... unless there's a dip in the stock market that year in which case... etc."

But that's a subjective value - up to you which thing you prefer! There isn't a wrong answer, as long as you know what you want, and why you want it.

LHW99

Having a guaranteed basic index-linked income (TPS + state pension) means you can invest savings, or start a DC pension as well, at a higher risk level than you might ordinarily consider, as a) it's for extras above the basic b) if markets go down, you are not forced to withdraw money for food / heating and c) if the additional does well, you may be able to use it for retiring a bit earlier than otherwise.