Is paying for additonal pension 100% not worth it anymore with Teachers Pension?

IAMIAM

I continually buy £250 every year. Now age 40, want to claim everything at age 60, or defer claiming this APB pot I have been building to age 65 instead and take the normal pension at 60.
(I have paid for 3 year buy out too)

£250 APB. 1 year term, cost is £254 per month before tax, effectively £3000
£2400 in real terms after tax reduction. Do I still bother? Any thoughts....

Dazed_and_C0nfused

IAMIAM said:

I continually buy £250 every year. Now age 40, want to claim everything at age 60, or defer claiming this APB pot I have been building to age 65 instead and take the normal pension at 60.
(I have paid for 3 year buy out too)

£250 APB. 1 year term, cost is £254 per month before tax, effectively £3000
£2400 in real terms after tax reduction. Do I still bother? Any thoughts....

Could you buy a £250 annuity, with the same inflation protection, for £2,400?

On-the-coast

Hope you’re not a maths teacher. 

Looks like in region of 50% discount to open market to me.  

JoeCrystal

IAMIAM said:

I continually buy £250 every year. Now age 40, want to claim everything at age 60, or defer claiming this APB pot I have been building to age 65 instead and take the normal pension at 60.
(I have paid for 3 year buy out too)

£250 APB. 1 year term, cost is £254 per month before tax, effectively £3000
£2400 in real terms after tax reduction. Do I still bother? Any thoughts....

Considering most of your posts within this forum always seem to be about the TPS, maybe it would be better for your mental health to opt out of the Added Pension altogether. If you continue to doubt your decisions, you might as well discard one of such sources. Taxpayers would thank you for saving the UK Treasury some money, at least. You are in a very fortunate position compared to others in the country and should take advantage of it as much as possible.

hugheskevi

Using the Teachers' Pension Added Pension calculator, it would cost a person reaching age 40 today a lump sum of £3,000 (before tax relief) to purchase £250 of Added Pension payable from age 68.

The key point to initially define is what exactly you want. This could be any of the following, or a combination:

• A guaranteed income (and whether joint, and level or index linked)
• A tax-free lump sum
• A pot to flexibly draw taxable income from

Each year can be considered independently as they are separate decisions. For the first year, take a Defined Contribution pension as a comparator (ie Added Pension of £250 p/a vs DC pension of £3,000), assume an inflation rate of 2.5% p/a, a rate of return for the DC investments of CPI+2% after fees/charges, and an annuitisation rate of 4.5%. 

If a 25% lump sum was taken from the DC pension and an equivalent amount commuted from the Added Pension, the annuity would give an income 25% higher than the Added Pension. 

Not taking a lump sum at all from either the DC pension or the Added Pension would result in the Added Pension being 6% higher than the annuity.

So for Added Pension to be better, you need to want a guaranteed income, no lump sum, and be quite risk-averse to investment (CPI+2% return over a 20 year period should be quite easy to achieve with moderate risk investments) and future changes in markets (eg annuity rates).

A hybrid approach is also possible, using DC pension to fund the first part of retirement and so enabling the DB pension to be drawn later and so be a higher amount. That is a very efficient way to effectively annuitise a DC pension.

IAMIAM said:

I continually buy £250 every year. Now age 40, want to claim everything at age 60, or defer claiming this APB pot I have been building to age 65 instead and take the normal pension at 60. 

Is it possible to defer Added Pension, other than via phased retirement?

IAMIAM

JoeCrystal said:

IAMIAM said:

I continually buy £250 every year. Now age 40, want to claim everything at age 60, or defer claiming this APB pot I have been building to age 65 instead and take the normal pension at 60.
(I have paid for 3 year buy out too)

£250 APB. 1 year term, cost is £254 per month before tax, effectively £3000
£2400 in real terms after tax reduction. Do I still bother? Any thoughts....

Considering most of your posts within this forum always seem to be about the TPS, maybe it would be better for your mental health to opt out of the Added Pension altogether. If you continue to doubt your decisions, you might as well discard one of such sources. Taxpayers would thank you for saving the UK Treasury some money, at least. You are in a very fortunate position compared to others in the country and should take advantage of it as much as possible.

Considering most of your replies are after a full blown investigation. Maybe you should join MI5.

Bobziz

IAMIAM said:

JoeCrystal said:

IAMIAM said:

I continually buy £250 every year. Now age 40, want to claim everything at age 60, or defer claiming this APB pot I have been building to age 65 instead and take the normal pension at 60.
(I have paid for 3 year buy out too)

£250 APB. 1 year term, cost is £254 per month before tax, effectively £3000
£2400 in real terms after tax reduction. Do I still bother? Any thoughts....

Considering most of your posts within this forum always seem to be about the TPS, maybe it would be better for your mental health to opt out of the Added Pension altogether. If you continue to doubt your decisions, you might as well discard one of such sources. Taxpayers would thank you for saving the UK Treasury some money, at least. You are in a very fortunate position compared to others in the country and should take advantage of it as much as possible.

Considering most of your replies are after a full blown investigation. Maybe you should join MI5.

Or perhaps they should consider becoming a teacher and then they can be 'fortunate' too.

JoeCrystal

IAMIAM said:

Considering most of your replies are after a full blown investigation. Maybe you should join MI5.

It is always helpful to read previous posts, as most recent ones often provide insufficient details to explain or leave out relevant information that helped others in their replies. So it is a very useful thing to do. 

Bobziz said:

Or perhaps they should consider becoming a teacher and then they can be 'fortunate' too.

Indeed, that is certainly my plan for the future.  although not a teacher, but a job with the Local Government instead. I know that for many, the main attraction was the pension scheme, and, importantly, the ability to purchase a DB pension with transfer-in (as long as the employer permits it).