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  • FIRST POST
    • Happymonday
    • By Happymonday 18th Sep 19, 7:21 PM
    • 9Posts
    • 8Thanks
    Happymonday
    Worth doing?
    • #1
    • 18th Sep 19, 7:21 PM
    Worth doing? 18th Sep 19 at 7:21 PM
    My wife is a part-time teacher and opted out of her DB scheme last November because she plans to retire in the next 12-24 months and the teachers scheme DB's are based on the last 10 years of contributions. Continuing in a part time capacity would have eroded her DB's. She is only working 3 days a week and her salary is 24k. I have suggested to her that by putting 5% away in a separate scheme would still be worthwhile as it would still help to reduce her tax. However, if she is just working for the next 12-24 months is this really worthwhile due to any charges associated with setting up a new scheme? Advice appreciated.
Page 1
    • Audaxer
    • By Audaxer 18th Sep 19, 8:50 PM
    • 1,877 Posts
    • 1,177 Thanks
    Audaxer
    • #2
    • 18th Sep 19, 8:50 PM
    • #2
    • 18th Sep 19, 8:50 PM
    She could start paying into a SIPP and get the tax relief and be able to withdraw it starting at 55 if she wishes to. There are plenty of threads on this forum about doing this and benefiting immediately from the tax relief added by HMRC.

    It seems to me a strange DB scheme if she gets a higher pension from stopping paying into the scheme when she goes part-time.
    • drumtochty
    • By drumtochty 18th Sep 19, 11:38 PM
    • 289 Posts
    • 166 Thanks
    drumtochty
    • #3
    • 18th Sep 19, 11:38 PM
    • #3
    • 18th Sep 19, 11:38 PM
    In a number of schemes a number of years ago, if you earned say 25k a year for a 5 day week and you went down to 3 days. The scheme after a year or three considered your salary now 15k a year and the pension you received after that period was based on the 15k earnings.


    These days a lot of schemes still consider you earn a full time salary of 25k a year but you only get 60% of a years pension allocated for the years you are working 3 days a week. This to me is a better result.


    You would have to check again with the pension administrator exactly what happens and not listen to anyone else.
    • AnotherJoe
    • By AnotherJoe 19th Sep 19, 6:33 AM
    • 15,964 Posts
    • 19,171 Thanks
    AnotherJoe
    • #4
    • 19th Sep 19, 6:33 AM
    • #4
    • 19th Sep 19, 6:33 AM
    My wife is a part-time teacher and opted out of her DB scheme last November because she plans to retire in the next 12-24 months and the teachers scheme DB's are based on the last 10 years of contributions. Continuing in a part time capacity would have eroded her DB's. She is only working 3 days a week and her salary is 24k. I have suggested to her that by putting 5% away in a separate scheme would still be worthwhile as it would still help to reduce her tax. However, if she is just working for the next 12-24 months is this really worthwhile due to any charges associated with setting up a new scheme? Advice appreciated.
    Originally posted by Happymonday

    There are many SIPPs with no setup charges. Have you investigated or were you guessing there were setup charges?

    So yes its definitely worth contributing. Also, if she retires before she gets SP or employers pension she could then withdraw the 25% tax addition she get on her contributions without paying any tax on it.
    So why only 5%? Why not 50%?

    And even if not employed (once she does retire) she can still pay in 2880 and get it bumped up to 3600. As can you.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • hugheskevi
    • By hugheskevi 19th Sep 19, 6:37 AM
    • 2,344 Posts
    • 3,136 Thanks
    hugheskevi
    • #5
    • 19th Sep 19, 6:37 AM
    • #5
    • 19th Sep 19, 6:37 AM
    The Teachers' Pension glossary says:
    Final Average Salary

    The salary used to calculate a member’s final salary pension benefits based on the most beneficial of the following; either the last 365 days salary or the best 3 years’ salary over the previous 10 years plus any applicable inflation. If a member has part-time employment, their full time equivalent salary will always be used in the calculation.
    So the part-time status appears to be irrelevant.

    As long as the best 3 years' salary over the previous 10 years aren't about to drop out of the calculation (ie they were something like 2008, 2009 and 2010) then it would seem she could be in the scheme without affecting the final pay figure used to calculate the pension.
    • jimi_man
    • By jimi_man 19th Sep 19, 7:42 AM
    • 175 Posts
    • 204 Thanks
    jimi_man
    • #6
    • 19th Sep 19, 7:42 AM
    • #6
    • 19th Sep 19, 7:42 AM
    Opt back in again as soon as she can!
    • Albermarle
    • By Albermarle 19th Sep 19, 8:23 AM
    • 1,564 Posts
    • 997 Thanks
    Albermarle
    • #7
    • 19th Sep 19, 8:23 AM
    • #7
    • 19th Sep 19, 8:23 AM
    There are many SIPPs with no setup charges
    Also there are personal and stakeholder pensions , which are simpler than SIPPs for an inexperienced investor . Also with no set up charges .
    • jem16
    • By jem16 19th Sep 19, 9:01 AM
    • 18,718 Posts
    • 11,560 Thanks
    jem16
    • #8
    • 19th Sep 19, 9:01 AM
    • #8
    • 19th Sep 19, 9:01 AM
    My wife is a part-time teacher and opted out of her DB scheme last November because she plans to retire in the next 12-24 months and the teachers scheme DB's are based on the last 10 years of contributions. Continuing in a part time capacity would have eroded her DB's. She is only working 3 days a week and her salary is 24k.
    Originally posted by Happymonday
    I'm afraid that this was a very bad decision as that's not how the TPS works. Salary for pension purposes is always based on the full-time equivalent.

    Even if it were true it's unlikely to have made any difference as it's either based on final salary or the average of the best 3 years in the last 10 years adjusted for inflation. When I retired almost 5 years ago, my final salary was not the best one to use for calculation purposes.

    Your wife should opt back in ASAP. Let's hope she can rejoin her original scheme ( assuming she has protection) and will not have to go onto the CARE scheme with the higher NRA.
    • Happymonday
    • By Happymonday 19th Sep 19, 5:41 PM
    • 9 Posts
    • 8 Thanks
    Happymonday
    • #9
    • 19th Sep 19, 5:41 PM
    • #9
    • 19th Sep 19, 5:41 PM
    Many thanks- and yes I was guessing!
    • Dox
    • By Dox 20th Sep 19, 8:24 AM
    • 1,631 Posts
    • 1,228 Thanks
    Dox

    You would have to check again with the pension administrator exactly what happens and not listen to anyone else.
    Originally posted by drumtochty
    Perfectly easy to check on the scheme's website - and what OP says is accurate.

    What you say is also accurate. It used to be how the TPS operates, but that is no longer the case.
    • stephenadarglas
    • By stephenadarglas 20th Sep 19, 9:30 AM
    • 64 Posts
    • 15 Thanks
    stephenadarglas
    Should have spoken to the TPS prior to making this decision which is, in my opinion, the wrong one. My comments are based on being part of the TPS for over 30 years.
    • AnotherJoe
    • By AnotherJoe 20th Sep 19, 9:53 AM
    • 15,964 Posts
    • 19,171 Thanks
    AnotherJoe
    Perfectly easy to check on the scheme's website - and what OP says is accurate.

    What you say is also accurate. It used to be how the TPS operates, but that is no longer the case.
    Originally posted by Dox

    Dox, are you saying that the Teachers Pension Website Glossary is incorrect regards how part time working is catered for?
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • xylophone
    • By xylophone 20th Sep 19, 9:59 AM
    • 31,371 Posts
    • 19,450 Thanks
    xylophone
    Perfectly easy to check on the scheme's website - and what OP says is accurate.
    The OP said

    My wife is a part-time teacher and opted out of her DB scheme last November because she plans to retire in the next 12-24 months and the teachers scheme DB's are based on the last 10 years of contributions. Continuing in a part time capacity would have eroded her DB's.



    It would appear (from posts 5 and 8) that the OP's post may not have been wholly accurate?

    And it is always worth checking with the administrator (and I'd do it in writing) one's understanding of scheme rules - it could avoid expensive mistakes.

    What you say is also accurate. It used to be how the TPS operates, but that is no longer the case.
    And so what? The OP actually said was

    In a number of schemes a number of years ago,
    • xylophone
    • By xylophone 20th Sep 19, 11:17 AM
    • 31,371 Posts
    • 19,450 Thanks
    xylophone
    https://www.teacherspensions.co.uk/members/planning-retirement/calculating-benefits.aspx
    • AnotherJoe
    • By AnotherJoe 20th Sep 19, 11:29 AM
    • 15,964 Posts
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    AnotherJoe

    That doesn' mention (AFAICS) the issue discussed here regarding part time working.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • LHW99
    • By LHW99 20th Sep 19, 12:12 PM
    • 2,193 Posts
    • 2,047 Thanks
    LHW99
    My experience is a good number of years ago, so may not be relevant, but -

    if you worked say 50% part time then:
    a) your 'years multiplier' (1/80 in those days) would go up 1/2 year for a full year's part time employment (other proportions would work similarly).
    b) The total number of years (1/80's) earned by full time (1 year = 1 'year multiplier') plus part time (1/2 year for each tear worked in this example) work would be calculated at the time of finally leaving employment (at retirement or before).
    c) That total was used to calculate pension as:
    1/80 x 'total years multiplier' x best 3 year average salary in preceding 10


    d) If this was deferred, rather than drawn at retirement, then the result would be increased according to whatever rule was in play at the time (RPI / CPI etc) until NRA
    • xylophone
    • By xylophone 20th Sep 19, 12:42 PM
    • 31,371 Posts
    • 19,450 Thanks
    xylophone
    That doesn' mention (AFAICS) the issue discussed here regarding part time working.
    Scroll down to FAQ.
    • xylophone
    • By xylophone 20th Sep 19, 12:46 PM
    • 31,371 Posts
    • 19,450 Thanks
    xylophone
    https://community.tes.com/threads/part-time-and-pension.765507/

    may also be of interest.
    • AnotherJoe
    • By AnotherJoe 20th Sep 19, 2:43 PM
    • 15,964 Posts
    • 19,171 Thanks
    AnotherJoe
    Perfectly easy to check on the scheme's website - and what OP says is accurate.
    Originally posted by Dox

    No, it isn't it's clearly wrong.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Sue S
    • By Sue S 20th Sep 19, 3:21 PM
    • 268 Posts
    • 190 Thanks
    Sue S
    Please be very careful before opting back in. My sister has left the TPS because if she'd remained she'd have lost 2008 from her "best in 3" calculation. Due to high inflation/RPI/CPI increases that was one of her best years. She would have paid into the pension scheme all year and ended up having paid a full year's contributions to get her a lower pension!

    Speak to the TPS before making any decision and don't blindly opt back in as some posters have advised.
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