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  • FIRST POST
    • mcoliver88
    • By mcoliver88 14th Apr 18, 8:12 PM
    • 5Posts
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    mcoliver88
    HELP, I dont understand Pensions
    • #1
    • 14th Apr 18, 8:12 PM
    HELP, I dont understand Pensions 14th Apr 18 at 8:12 PM
    Hi,

    I need some advice from those who are more finance savy than myself. So currently I pay into a Teachers Pension of about 9.6% per month. However I have no clue how pensions work.

    From what I understand, that I pay in each month and so does my employer. Which I can access when I retire at the age of 60. However I have just looked at my benefit statement and this has confused me even more.

    So any advice, particularly from those who pay into the TPS would be great.

    I have looked at the Money Advice service and and looked on here, but still not sinking in.

    Thanks in advanced.
Page 1
    • JoeCrystal
    • By JoeCrystal 14th Apr 18, 8:35 PM
    • 1,401 Posts
    • 859 Thanks
    JoeCrystal
    • #2
    • 14th Apr 18, 8:35 PM
    • #2
    • 14th Apr 18, 8:35 PM
    Okay, first of all, the pension scheme you got is one of the best (and one of the most straightforward to understand in my opinion) in the country and very valuable. Secondly, there is a website online that is to help you with understanding TPS. https://www.teacherspensions.co.uk/members/member-hub.aspx

    With TPS, it is an unfunded, defined benefit pay-as-you-go occupational pension scheme operated by the Department for Education on behalf of the teachers. What part of the benefit statement you do not understand?

    PS: Here is the link to FAQs on your benefit statement. https://www.teacherspensions.co.uk/members/faqs/your-benefit-statement.aspx
    Last edited by JoeCrystal; 14-04-2018 at 8:47 PM.
    • Oliver1191
    • By Oliver1191 14th Apr 18, 9:03 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    • #3
    • 14th Apr 18, 9:03 PM
    • #3
    • 14th Apr 18, 9:03 PM
    It's my understanding that with the TP you can get it at the age of 68 (for career average). If you want it from the age of 58, it will be reduced...by about 25%, I think.

    Whilst I agree to an extent with JoeCrystal that there are some positives with the Teachers Pension, i'm not convinced that it is a 'good' investment as such. It's an option.

    It's essentially a cheap annuity. Yes the employer contributes towards this and yes you get tax relief. It grows by CPI (so it keeps up with inflation) + 1.6% a year for every year you continue to be in the scheme.

    However, cashing it in at 68 is really unrealistic. Even if you do, it'll take a long time to break even, let alone make a nice amount back. Fingers crossed we all live that long.

    Whether or not it's the best investment out there is really entirely another question. A friend of mine invested in property instead and has made far more than I will from the TP. He's now able to use the income from that to invest in a SIPP and get 40% tax relief as a result...

    Another friend works for a private company (programming) which has a very attractive pension scheme, plus a load of other financial perks e.g. a share buying scheme, contribution towards a house purchase.

    I think it's best seen as an option on the journey to financial independence. I've been in the scheme for about 9 years. I might purchase a bit more additional pension benefit later this year. Once I hit a projected statement figure of say 14 / 15k income a year, I'll reconsider whether or not i'll stay in.
    • Silvertabby
    • By Silvertabby 14th Apr 18, 9:07 PM
    • 2,517 Posts
    • 3,468 Thanks
    Silvertabby
    • #4
    • 14th Apr 18, 9:07 PM
    • #4
    • 14th Apr 18, 9:07 PM
    Rejoice. You have the benefit of a public sector defined benefit pension scheme that private sector employees can only dream of.
    • Oliver1191
    • By Oliver1191 14th Apr 18, 9:17 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    • #5
    • 14th Apr 18, 9:17 PM
    • #5
    • 14th Apr 18, 9:17 PM
    Silvertabbly, I don't think you can compare the TP to all private sector workers - whilst that's the slant the government and media portray it, but it's very misleading.

    Several friends who work for the so called 'private sector' have very lucrative pensions combined with multiple other financial products (like free shares every month).
    • Brynsam
    • By Brynsam 14th Apr 18, 9:23 PM
    • 725 Posts
    • 459 Thanks
    Brynsam
    • #6
    • 14th Apr 18, 9:23 PM
    • #6
    • 14th Apr 18, 9:23 PM
    It's my understanding that with the TP you can get it at the age of 68 (for career average). If you want it from the age of 58, it will be reduced...by about 25%, I think.
    Originally posted by Oliver1191
    'Your understanding'....'you think'...suggest you brush up on your knowledge of one of the best schemes in the country.
    • Dox
    • By Dox 14th Apr 18, 9:27 PM
    • 341 Posts
    • 195 Thanks
    Dox
    • #7
    • 14th Apr 18, 9:27 PM
    • #7
    • 14th Apr 18, 9:27 PM
    Silvertabbly, I don't think you can compare the TP to all private sector workers - whilst that's the slant the government and media portray it, but it's very misleading.

    Several friends who work for the so called 'private sector' have very lucrative pensions combined with multiple other financial products (like free shares every month).
    Originally posted by Oliver1191
    You're right, it isn't a sensible comparison - their pensions aren't backed by the taxpayer. The TPS is a fantastic scheme. If you're jealous of the other benefits provided in the private sector, get a job in it.
    • Oliver1191
    • By Oliver1191 14th Apr 18, 9:29 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    • #8
    • 14th Apr 18, 9:29 PM
    • #8
    • 14th Apr 18, 9:29 PM

    'Your understanding'....'you think'...suggest you brush up on your knowledge of one of the best schemes in the country.
    I'm always happy to be corrected Brynsam :-)

    What specifically are you suggesting that I am incorrect with?

    Incidentally, i'm not suggesting that this isn't a good public sector pension when compared to other public pensions. I'm highlighting that this may not be the best investment option. I have said that it is an option to consider - most likely in combination with other investments that can be made.
    • Brynsam
    • By Brynsam 14th Apr 18, 9:32 PM
    • 725 Posts
    • 459 Thanks
    Brynsam
    • #9
    • 14th Apr 18, 9:32 PM
    • #9
    • 14th Apr 18, 9:32 PM
    Wasn't it Freud who talked about pension envy....?!
    • Oliver1191
    • By Oliver1191 14th Apr 18, 9:36 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    You're right, it isn't a sensible comparison - their pensions aren't backed by the taxpayer. The TPS is a fantastic scheme. If you're jealous of the other benefits provided in the private sector, get a job in it.
    Thank you for your thoughts Dox.

    The point i'm making is that you cannot compare teaching to all 'private sector' jobs. There are jobs in the vague 'private sector' which offer better financial incentives and there are those that do not. Which specific job would you say that teaching is comparable to?

    Logically, if the TP scheme is so great, why don't you join it? There are plenty of jobs available as there is currently a teaching recruitment and retention crisis.
    • Oliver1191
    • By Oliver1191 14th Apr 18, 9:39 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    Wasn't it Freud who talked about pension envy....?!
    Sorry, not with you.
    • sandsy
    • By sandsy 14th Apr 18, 9:55 PM
    • 1,311 Posts
    • 788 Thanks
    sandsy
    Essentially, your pension scheme provides you with a guaranteed income for life, from the scheme's normal retirement age. The amount of pension income depends on your years of service and your earnings each year.

    The contribution you pay has no direct link to the income you receive which is worth way more than your contribution. You should think of the pension you accrue as a valuable part of your overall remuneration package. People working in the private sector would have to pay considerably more for the same level of pension that you are accruing (essentially your pension is cross subsidised by every taxpayer in the country).

    Don't ever think of opting out as you would regret it, in retirement.
    • Pun
    • By Pun 14th Apr 18, 10:06 PM
    • 670 Posts
    • 562 Thanks
    Pun

    Logically, if the TP scheme is so great, why don't you join it? There are plenty of jobs available as there is currently a teaching recruitment and retention crisis.
    Originally posted by Oliver1191
    Not logical at all - presumably the poster isn't a teacher and doesn't want to be. Most of us pick careers we want to follow, not pension schemes we want to join.

    if you are a teacher, the pension scheme is one of the best reward mechanisms going.
    • Pun
    • By Pun 14th Apr 18, 10:09 PM
    • 670 Posts
    • 562 Thanks
    Pun
    Wasn't it Freud who talked about pension envy....?!
    Originally posted by Brynsam
    Great comment - love it!
    • Oliver1191
    • By Oliver1191 14th Apr 18, 10:13 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    Well said Sandsy.

    Is it misleading to compare the private sector and teaching in this way, though? You might be working for a company that offers several other financial products and get a generous employer-matched contribution + 40% tax relief. Here's one company that offers other financial incentives: https://www.cgi-group.co.uk/careers/experienced-professionals/company-benefits

    When considering whether or not the TP is a good investment, surely it needs to be evaluated in terms of your goal that you are trying to achieve relative to the risk and opportunity cost that you are willing to undertake. A top cash-ISA might pay 2%, but - depending on your goal - you may well opt for a savings account paying 5% because the returns are greater. Just because the cash-ISA is the best out there, it doesn't mean by default you should get one.
    • Oliver1191
    • By Oliver1191 14th Apr 18, 10:25 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    Not logical at all - presumably the poster isn't a teacher and doesn't want to be. Most of us pick careers we want to follow, not pension schemes we want to join.

    if you are a teacher, the pension scheme is one of the best reward mechanisms going.
    I agree with you, Pun. I was responding to Dox's comment which said:

    If you're jealous of the other benefits provided in the private sector, get a job in it.
    It's rhetorical - as you say, most people don't choose a job for the pension on offer.
    • John-K
    • By John-K 14th Apr 18, 10:37 PM
    • 516 Posts
    • 732 Thanks
    John-K
    Well said Sandsy.

    Is it misleading to compare the private sector and teaching in this way, though?.
    Originally posted by Oliver1191
    Indeed it is. If you are bad at your job in the private sector, you’ll lose it. It is virtually impossible in teaching for this to happen. You can be the worst teacher in the world and your union will fight tooth and nail for you to be paid the same as the competent ones who care.
    • ewaste
    • By ewaste 14th Apr 18, 10:47 PM
    • 60 Posts
    • 38 Thanks
    ewaste
    The thread seems to be discussing what is essentially two polar opposites on the risk and culture scale without having actually mentioned it.

    Is it misleading to compare the private sector and teaching in this way, though? You might be working for a company that offers several other financial products and get a generous employer-matched contribution + 40% tax relief.
    Originally posted by Oliver1191
    Tax relief is available to everyone and as has already been alluded to the TPS employers contribution is at a level most in the private sector can only dream of.

    While the teaching profession may lack share save schemes and the like so to do many if not most private employers so you'd be looking at a subset of employers and an even smaller subset who would offer 'generous' employer matched contributions.

    I presume you are playing devils advocate for the purposes of stimulating debate, I would agree that for a lot of people with qualifications and experience, in for example a STEM subject, teaching is not the most attractive profession to consider from a total rewards standpoint.
    • Oliver1191
    • By Oliver1191 14th Apr 18, 11:21 PM
    • 47 Posts
    • 13 Thanks
    Oliver1191
    While the teaching profession may lack share save schemes and the like so to do many if not most private employers so you'd be looking at a subset of employers and an even smaller subset who would offer 'generous' employer matched contributions.
    Yes, indeed, ewaste. Teaching is a skilled profession that requires both QTS and at least a degree. It should therefore be compared to jobs with a similar level of skill. There are plenty of jobs which have lower entry requirements in the public sector and as a result the pension contributions are far less.

    I would agree that for a lot of people with qualifications and experience, in for example a STEM subject, teaching is not the most attractive profession to consider from a total rewards standpoint.
    Indeed. Also, that it depends on your investment goal. If your goal is financial independence, then there may be better ways to do that. If you want security, then the TP could be a good option. If you need to buy a house, then the TP isn't of much use.

    It concerns me sometimes on threads like these that they become highly emotionally charged, with people basing decisions on their strongly held emotion, rather than a well-reasoned view. Equally, on some threads, views are dismissed, rather than debated. If a well reasoned argument can be made, we should be prepared to change our views accordingly.
    • mgdavid
    • By mgdavid 15th Apr 18, 12:41 AM
    • 5,516 Posts
    • 4,818 Thanks
    mgdavid
    Yes, indeed, ewaste. Teaching is a skilled profession that requires both QTS and at least a degree. It should therefore be compared to jobs with a similar level of skill. There are plenty of jobs which have lower entry requirements in the public sector and as a result the pension contributions are far less.



    Indeed. Also, that it depends on your investment goal. If your goal is financial independence, then there may be better ways to do that. If you want security, then the TP could be a good option. If you need to buy a house, then the TP isn't of much use.

    It concerns me sometimes on threads like these that they become highly emotionally charged, with people basing decisions on their strongly held emotion, rather than a well-reasoned view. Equally, on some threads, views are dismissed, rather than debated. If a well reasoned argument can be made, we should be prepared to change our views accordingly.
    Originally posted by Oliver1191
    I refer you to post #1 where you wrote the thread title 'HELP, I dont understand Pensions'.
    I agree with you,nothing you've said since counters that admission. Instead of trying to start an argument about private vs public sector employment and overall reward packages I suggest you read and digest the good information and guidance about TPS given so far.
    The questions that get the best answers are the questions that give most detail....
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