Teachers Pension Scheme - new member options

DT2001

My son has just started as a teacher and has the option of Buy Out (one off option) to reduce  NRD by 1, 2 or 3 years.
Example 3 years will cost 2.94% of pensionable earnings £948.15 p.a.
The website says the rates you will be required to pay will change throughout your career.


Other option is a faster accrual rate (1/55, 1/50 or 1/45 opt in annually). An example of choosing 1/45th rather than standard 1/57th is 
Age 22
Salary £32250
Additional cost £2976.68
Standard Pension £565.79
Enhanced £716.67 - additional £150.88

Accrual at 1/50th
Additional cost £1564.13
Enhanced £645.00 - additional pension £79.21

The benefit is enhanced each year by inflation plus, whilst an active member, 1.6%

He will be liable to make Student Loan Repayments from the next tax year so I presume the ‘cost’ to him of either scheme would be reduced by these?

Are there any forumites with knowledge of the scheme that can help enlighten my son of the pros and cons of these two alternatives.

Marcon

DT2001 said:

He will be liable to make Student Loan Repayments from the next tax year so I presume the ‘cost’ to him of either scheme would be reduced by these?

Helpful reading: https://studentfinancecalculator.co.uk/pensions

I don't think that's correct unless he can make these payments by salary sacrifice - and I'm not aware that's an option under TPS other than as follows:

Salary sacrifice in the TPS

Conventional salary sacrifice to reduce National Insurance is not available in the TPS. Only salary sacrifice arrangements specifically included in the School Teachers' Pay and Conditions Document can be included as pensionable earnings (and on which contributions must be paid).

A member can choose to give up part of their gross salary, which enables the following benefits to remain pensionable within the Teachers’ Pension Scheme:

(i) child care voucher or other child care benefit scheme;
(ii) a cycle or cyclist's safety equipment scheme; or
(iii) a mobile telephone scheme entered into on or before 5 April 2017 (except that a salary sacrifice arrangement for a mobile telephone scheme will only be covered by the provisions of this paragraph up until 6 April 2018).

Everything else is ‘unapproved’. For unapproved salary sacrifice schemes the pensionable salary used to calculate pensions is the lower salary after salary sacrifice. 

DT2001 said:

Are there any forumites with knowledge of the scheme that can help enlighten my son of the pros and cons of these two alternatives.

Can he actually afford to pay more - and continue to do so? If the answer to that is 'no' or 'dunno', then however attractive it might be to be able to retire earlier and/or with a bigger pension becomes something of a moot point.

DT2001

He can afford more at the moment as very low overheads (living on site) so thought the annual option in on the faster accrual rate might be suited especially with the 1.6% extra above CPI on annual review.

Will research more about salary sacrifice 

fiendishlyclever

These videos on David's YouTube channel might be useful
https://www.youtube.com/@dfountain