Teacher pension changing to civil service pension

kamesabe

Hello,

Little confused at the moment and hoping someone could help demystify.

Currently a teacher paying into the teachers' pension. I will be changing to a civil service role in September with a civil service pension.

If I change back to teaching in a few years time, are there any penalties to thhe teachers' pension?
Will the two pensions balance out roughly speaking so the benefits are similar to if I had stayed in teaching?
Is there anything else I need to consider about this change?

Finally, is it worth buying extra teacher pension or civil service pension, or would I be better off putting money into a private pension.

Thank you!

hugheskevi

Currently a teacher paying into the teachers' pension. 

Which year did you join the Teacher's pension scheme?

If I change back to teaching in a few years time, are there any penalties to thhe teachers' pension?

No penalties, but there may be other implications if you joined before April 2015.

Will the two pensions balance out roughly speaking so the benefits are similar to if I had stayed in teaching?

Pretty much. The Teacher's scheme is good for younger members who will stay in the profession, the Civil Service scheme is much better for older Civil Servants than younger ones. But they are both very good schemes.

Is there anything else I need to consider about this change?

Transferring your Teacher's pension into the Civil Service scheme using a Club transfer.

is it worth buying extra teacher pension or civil service pension, or would I be better off putting money into a private pension.

The cost of extra pension is calculated using a discount rate of CPI+1.7%. You can think of buying extra pension as locking into an investment yielding CPI+1.7% net of fees. For a long-term investment this is a poor return. There is effectively no tax free lump sum due to the poor 12:1 commutation rate offered by the scheme. You are also exposed to the risk that State Pension age (and hence your NPA) increases in the future. You do however have no investment or inflation risk, albeit certainty purchased at a high cost. 

A DC pension invested largely or wholly in equities and similar would almost certainly be better value than extra pension in the long term. 

If you are a basic rate taxpayer but expect to be a higher rate taxpayer at some future point you may find it preferable to put money into an S+S ISA instead, and contribute to a pension when you are a higher rate taxpayer, drawing down the S+S ISA to facilitate higher pension contributions at that time.

You should also consider whether a LISA is attractive. It is likely to be better than putting money into a DC pension for a basic-rate taxpayer.