Teachers Pension - break in service

Narrowboat · 16 May 2019 at 6:26PM

I’m a teacher with 11.2 years service. In 2015 I took a lower paid role at a different school, and opted out of the pension scheme a year later as there was a danger that my pension would reduce as it was based on my final salary.

When I opted out my salary was £25k, but the final salary scheme can be based on your best 3 years of salary in the last 10 years. My best salary years in the 10 years up to 2016 (when I opted out) were 2007-2010. Adjusted for annual increases, this salary was £40k. So my pension is 11.2 / 80 * £40k = £5.6k (this is confirmed by my TPS statement).

I’ve now got my salary back up to £36.6k (pro rata as I’m part time). So do I opt back in? I’m 53 and if I opted back in then my best salary years will soon fall outside of the 10 years rule. So my best salary will drop to £36.6k and I think my pension will drop by £470 p.a.

If I opted back in, I’ll separately be building up pension in the career average scheme, but as I’m only part time it will take a while to replace the £470 I lose in the final salary scheme.
I have been opted out almost 3 years. I believe that after a 5 year gap the link to the final salary is broken, so I could go back into the scheme without worrying that my new salary is below the £40k from my best years. At the moment I’m favouring this approach, but it seems ridiculous that I can’t pay into a pension because it will reduce my benefits. There’s something called a restricted hypothetical calculation, but I’m not sure this helps as my salary in the career average scheme at the time of the break was only £25k.

Am I missing anything? The TPS don’t like to give answers on specifics and just say I should contact an IFA, but has anyone dealt with an IFA who knows the TPS scheme well enough?

thanks

Dazed_and_confused · 16 May 2019 at 8:31PM

but it seems ridiculous that I can’t pay into a pension because it will reduce my benefits

Assuming your final salary issue actually does make it worthwhile for you to have opted out in the first place what is stopping you contributing to a personal pension, stakeholder pension or SIPP?

Narrowboat · 18 May 2019 at 1:20PM

Yes I could open a SIPP, but the Teachers Pension is supposed to be a big perk of the job and its a shame the rules seem to result in a reduced pension if I started to contribute again.

NoMore · 18 May 2019 at 1:50PM

Of course you opt back in, because you start building years service again!

You've lost 3 years service for what!

From your figures:

at opt out: 11.3 year service Final salary 40k = 5.5k pension

If you hadn't opted out and current figures:

14.3 years service with FS of 36k = 6.4k pension.

So what your final salary dropped, years service is a huge factor on your pension, which you threw away.

JGB1955 · 18 May 2019 at 2:04PM

Just a thought ....if you have (for example) a 0.5 contract at a full time salary if £40K, doesn't that earn you a half year at final salary of £40K, rather than a full year at £20K?

Narrowboat · 18 May 2019 at 6:16PM

NoMore wrote: »

Of course you opt back in, because you start building years service again!

You've lost 3 years service for what!

From your figures:

at opt out: 11.3 year service Final salary 40k = 5.5k pension

If you hadn't opted out and current figures:

14.3 years service with FS of 36k = 6.4k pension.

So what your final salary dropped, years service is a huge factor on your pension, which you threw away.

Thanks for your response. As I'm only 2 days a week then the three years of not opting out would have taken me up to 12.4 years = £5.6k pension. So it would have been 3 years of paying pension for no real benefit (and when I opted out I was on £25k with no guarantee of every getting back up, so I was possibly looking at 12.4 years @ £25k = £3.9k pension). Anyway, I am where I am and still think its best to wait another 2 years.

hyubh · 18 May 2019 at 6:40PM

Narrowboat wrote: »

As I'm only 2 days a week then the three years of not opting out would have taken me up to 12.4 years = £5.6k pension.

If you went down to £25K in 2015, was this not at or around the same time as moving to CARE accrual, or did you have tapered protection to stay in the final salary scheme?

So it would have been 3 years of paying pension for no real benefit (and when I opted out I was on £25k with no guarantee of every getting back up, so I was possibly looking at 12.4 years @ £25k = £3.9k pension). Anyway, I am where I am and still think its best to wait another 2 years.

Just to be clear, the £25k was full time/full time equivalent...? Speaking as a non-teacher, going from £40K to £25K FTE sounds a massive reduction in seniority.

zagubov · 18 May 2019 at 11:31PM

As you've only worked in the profession for 11 years, and you're now only 53, am I right to think you've another pension from other employment?
Are you or were you in a position to pay extra into the TPS or your other pension?
Have you spoken to your union or visited the relevant teacher's press websites?
Was your NPA 60 or higher?

Were there disadvantages to paying into a SIPP while you weren't in the TPS?

Can the TPS tell you what is the penalty if you retire between say 7 and 13 years early?

If you retire early do you collect both parts of your pension?

If you retire early and return to work with at least a one day gap, can you get your FS pension but actuarially reduced/revised benefits (ARBs).

What would the monthly pension be?
Can you keep adding to the CARE pension by returning to the TPS after retirement.
Can this be paid separatly or does it have to be taken with the CARE years.

Narrowboat · 19 May 2019 at 1:30PM

hyubh wrote: »

If you went down to £25K in 2015, was this not at or around the same time as moving to CARE accrual, or did you have tapered protection to stay in the final salary scheme?

Just to be clear, the £25k was full time/full time equivalent...? Speaking as a non-teacher, going from £40K to £25K FTE sounds a massive reduction in seniority.

Yes it was around the time of moving to Career Average and yes it was a reduction in seniority as I no longer had my own class.

Teachers Pension - break in service

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