Pension, Final Salary - My Brain Hurts!

Dazed_and_C0nfused

LHW99 said:

The OP is an active member of both the 1/80ths final salary scheme and also the post 2022 career average scheme.

Also

Since April 2022, all teachers have been in the career average scheme (CARE). The benefits from that are:

Accrued more slowly (1/57th per year)

My understanding is that 1/80 per year is a smaller fraction than 1/57 per year, so CARE would actually accrue more quickly.

I think it was how the unions were persuaded not to fight the change.

So true!

Not sure what average teachers salary is but say £40k then 1/80th is £500 and 1/57th £701.75.

The trade off being a promotion or two could massively impact the £500.  And it was available, unreduced, at 60 not 67.

hugheskevi

LHW99 said:

My understanding is that 1/80 per year is a smaller fraction than 1/57 per year, so CARE would actually accrue more quickly.

The 1/80ths is payable without reduction from age 60, the 1/57 is payable without reduction from age 67. 

The reduction to take the 1/57 pension from age 60 would be about 29%. That reduces the accrual rate to close to 1/80ths. However, there is no automatic lump sum payable, as there is with the 1/80ths scheme.

The 1/80ths scheme revalues in line with earnings in-service, whereas the 1/57 scheme is CPI+1.6% in service.

MarlowMallard

hugheskevi said:

The 1/80ths is payable without reduction from age 60, the 1/57 is payable without reduction from age 67. 

The reduction to take the 1/57 pension from age 60 would be about 29%. That reduces the accrual rate to close to 1/80ths. However, there is no automatic lump sum payable, as there is with the 1/80ths scheme.

The 1/80ths scheme revalues in line with earnings in-service, whereas the 1/57 scheme is CPI+1.6% in service.

That 1.6 percent looks trivial, but over 30 years it compounds to a 61% increase.  So if you earn 40k at 37, the pension earned in the year is £702, but by age 67 it has the purchasing power of £1130 today,  if CPI is an accurate reflection of prices.   That's extremely generous.  

For comparison, the post-2016 universities scheme (USS) has an accrual of 1/75,  it's CPI-linked up to 5%, then half of the chunk from 5-15%, then nothing above,  so if CPI is 10% you get 7.5% so you lose in real terms.  (There is a 3x AP lump sum however).   

Vitor

- Yeh thanks hugheskevi.... 'take it or lose it' ... how should I have found that out that it existed? -

In the Teachers’ Pension Scheme it’s worth being clear on two points:

• If you don’t draw your final salary pension at age 60, you don’t get arrears later. But the pension isn’t “lost” either, it’s still linked to your eventual pensionable salary and, if taken after NPA, normally attracts a late-retirement uplift.

• Abatement isn’t a blanket “salary + pension can’t exceed full-time pay” rule. It applies only in certain re-employment situations, and the details vary from scheme to scheme.

So while the final salary link does remain, whether late-retirement factors apply and how abatement bites are things to confirm directly with Teachers’ Pensions, rather than assume from general principles.

DRS1

Vitor said:

- Yeh thanks hugheskevi.... 'take it or lose it' ... how should I have found that out that it existed? -

In the Teachers’ Pension Scheme it’s worth being clear on two points:

• If you don’t draw your final salary pension at age 60, you don’t get arrears later. But the pension isn’t “lost” either, it’s still linked to your eventual pensionable salary and, if taken after NPA, normally attracts a late-retirement uplift.

• Abatement isn’t a blanket “salary + pension can’t exceed full-time pay” rule. It applies only in certain re-employment situations, and the details vary from scheme to scheme.

So while the final salary link does remain, whether late-retirement factors apply and how abatement bites are things to confirm directly with Teachers’ Pensions, rather than assume from general principles.

Based on the document linked earlier I don't think the NPA60 benefits do get a late retirement uplift.  The NPA65 benefits do.

But I agree the OP should definitely check that and the abatement issue with TPS (and how he would go about claiming the NPA60 benefits now).

Isthisforreal99

As to how OP should have known, were they not getting annual statements showing what was payable at 60.

If it's any consolation there is a similar lack of knowledge in the Civil Service where people work full time beyond 60 where they could have taken partial retirement at 60, worked 3 days a week fotlr the same take home income (pay and pension). 

german_keeper

Isthisforreal99 said:

As to how OP should have known, were they not getting annual statements showing what was payable at 60.

If it's any consolation there is a similar lack of knowledge in the Civil Service where people work full time beyond 60 where they could have taken partial retirement at 60, worked 3 days a week fotlr the same take home income (pay and pension). 

Staying full time is even dafter than that, take home pay is higher under partial retirement because no NI is paid on the pension part of income. Assuming you can get your part time hours agreed at just under the abatement threshold.

LHW99

Isthisforreal99 said:

As to how OP should have known, were they not getting annual statements showing what was payable at 60.

If it's any consolation there is a similar lack of knowledge in the Civil Service where people work full time beyond 60 where they could have taken partial retirement at 60, worked 3 days a week fotlr the same take home income (pay and pension). 

On the whole (historically at least) the TPS have never sent annual statements for the DB scheme. The initial booklet let you know the accrual rate of 1/80, and apart from a statement of benefits if deferred (and at that time-point), you couldn't learn any more until just before claiming the pension.

It is really only relatively recently that any sort of calculators have been available.

Isthisforreal99

LHW99 said:

Isthisforreal99 said:

As to how OP should have known, were they not getting annual statements showing what was payable at 60.

If it's any consolation there is a similar lack of knowledge in the Civil Service where people work full time beyond 60 where they could have taken partial retirement at 60, worked 3 days a week fotlr the same take home income (pay and pension). 

On the whole (historically at least) the TPS have never sent annual statements for the DB scheme. The initial booklet let you know the accrual rate of 1/80, and apart from a statement of benefits if deferred (and at that time-point), you couldn't learn any more until just before claiming the pension.

It is really only relatively recently that any sort of calculators have been available.

My understanding is that it is a requirement. Could be wrong but MyCSP (who run Civil Service pensions) have reported themselves to Pensions Ombudsman as, for a small % of members, they will not be able to issue a statement.

peejaydj

Isthisforreal99 said:

As to how OP should have known, were they not getting annual statements showing what was payable at 60.

If it's any consolation there is a similar lack of knowledge in the Civil Service where people work full time beyond 60 where they could have taken partial retirement at 60, worked 3 days a week fotlr the same take home income (pay and pension). 

Yes  I kept checking my TP  and asking for advice and could see what I was going to get just did not know I had to claim it.