HELP, I dont understand Pensions

Please Oliver1191, have the courage of your convictions and opt out now. I and every other tax payer will owe you a debt of gratitude (rather than a pension).

I refer you to post #1 where you wrote the thread title 'HELP, I dont understand Pensions'.

Thank you McDavid. I didn't write the OP.

'Employer-matched' DC is not at all 'generous' compared to TPS DB - even on its own terms (which systematically underplay the true cost of the pension promised earned), the employer contribution is far higher than the employee, not merely matched. Moreover, '40% tax relief' is irrelevant, because that isn't in the gift of the employer - if a teacher is a higher rate taxpayer, then then they too will benefit from 40% tax relief

Thank you hyubh. As mentioned on an earlier post, it's not helpful to compare the financial benefits of different jobs when evaluating whether or not the TP is a good investment option for you. I gave the example of CGI, where they offer other financial incentives in addition to a pension. I think some of the posters are right when they say this 'sidetracks' us.

It is possible for teachers to achieve the 40% tax rate. More so in London. However, this is rare - the majority of teachers I've worked with are usually between M1 and M6, with most somewhere in the middle. Around 40% of teachers leave the profession within 5 years, so by default they wont achieve the higher rates of pay. A lot of teachers struggle financially (though not all).

Are you seriously suggesting it is reasonable for a teacher to opt out of the TPS...? If you are, care to elucidate an example scenario where it made sense...?

I think it very much depends on your circumstances and your goal. In my case, I am currently choosing to stay in the scheme (I may even buy additional pension benefit) as I want to achieve a specific income goal. Once I achieve this, I will re-evaluate. This gives me a sense of security. It wont necessarily remain the best financial option as my goals will likely change over time.

Until recently, I was working with an Assistant Headteacher who had been advised to leave the scheme and invest elsewhere. She had already built considerable assets (e.g. a house in London worth £600k, existing pensions and her husband's assets). She wanted other financial assets as she had no intention of working until 68. To be fair, i've yet to meet a colleague who does.

On the other hand, about 4 years ago I was working with a young teacher who was choosing not to pay into the scheme as she was saving to buy a house with her partner. She was low on the M scale, so I felt that she should stay in. She wasn't really interested in investing - for people who aren't the TP is a good safety net so you don't have to worry. However, she felt that it was more in her interests to come out - she pointed out that if she didn't own a home, a pension of the value she would accrue would essentially be worthless (because it wouldn't come close to covering her living costs).

OK, you've bought the house...what are you going to live on in old age? Are you in the hopelessly out of touch minority who believe downsizing will provide both home and income. I can only hope you are better informed about whatever subject it is you teach.

Thank you Dox (if a little harsh ;-).

I don't know the wealth that the OP has - I suppose this might change their view of the TP.

Please Oliver1191, have the courage of your convictions and opt out now. I and every other tax payer will owe you a debt of gratitude (rather than a pension).

Thank you msallen. As I said, my goal is to achieve a specified income, so for now I am choosing to stay in the TP. This may change in the future.

I know that most posters on this thread are strongly in favour of the TP. Although I've offered a different opinion, I am not strongly against it. I am very much in the middle.

The TP is an investment option. There are several benefits that come with it (we haven't mentioned the in service death-grant, for example). Whether or not it's a good investment option depends on your goals and attitude to risk. If you're not 'in' to investing, then the TP is a safe bet that provides a degree of security for some people.

Hi Oliver1191
I hope you get the answers and information you're looking for. I've had some fantastic advice from these boards over the years, and it annoys me when I see people trying to make facetious comments or observations when all you're doing is asking for some simple guidance. Keep posting, and ignore all the time wasters trying to show how smart they are. Good luck.

On the simple subject of pension provision, show me a large employer that provides a private sector pension as good as the TPS.

I feel sorry for the OP - mcoliver88 - he just wanted to understand his pension and has now been totally derailed by Oliver1191 responding about whether its worth it to stay in the TPS.

Unfortunately that's not what the OP asked and at this stage is probably an unhelpful discussion as the OP doesn't even understand his current pension before he can evaluate whether he should leave (which he hasn't mentioned he's considering btw) and the OP is probably more confused now than he was when he started the thread.