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Any teachers opted out of the pension scheme?

(32 Posts)
GetStuffezd Sun 04-Aug-13 13:24:26

Currently I pay approximately £200/month into my pension. I am really struggling financially and desperate to get rid of my £5k personal debt (OD, CCs and a loan.)

I know I'm only intending teaching for another 10 years max (I'm 28) and I genuinely don't know what to do. I'm considering opting out of the TPS and starting a private pension, which I've yet to research. I would then start by only paying £100/month and use the other 100 to get rid of the debt.

Has anyone done this? Can anyone think of any reasons why this isn't a good idea?

GetStuffezd Sun 04-Aug-13 13:30:14

Damn this should be in Money. Will ask for it to be moved.

CuthbertDibble Sun 04-Aug-13 13:54:16

If your employer contributes to the scheme too then I would stick with it.

I don't know the details of your scheme, but I would guess that your employer contributes at least as much as you.

That means that a minimum of £4,800 per annum is being out into your pension, if you opt out and set up a private pension instead you will only be paying £1,200 per annum into it.

chanie44 Sun 04-Aug-13 14:10:30

You get tax relief on your contributions so you won't get £200 a month back.

When I looked at opting out of mine, using an online calculator, I was only £80 a month better off, by the time I'd paid the higher deductions. If you do a google search, you can input your salary with and without the pension contributions. You will be surprised at how little it costs I the grand scheme of things. In fact, off to do it now and will report back.

Plus, you may loose other perks, like your death in device benefit.

RowanMumsnet (MNHQ) Sun 04-Aug-13 15:43:24

Hello there

We've moved this to Money Matters at the OP's request.

Anthracite Sun 04-Aug-13 15:51:14

The TPA is one of the best pensions going. You would have to be crazy desperate to opt out.

gallicgirl Sun 04-Aug-13 15:59:58

Please don't. The employer contributions will probably be considerably more than you pay.

Sleepyhoglet Sun 04-Aug-13 17:14:58

Don't opt out. Just don't. There is so much value in having a pension scheme where the employer also pays in. Yes, when it does eventually pay out in god knows 40 years time t will be small, but trust me, you will be grateful to have it.

GetStuffezd Sun 04-Aug-13 17:35:00

Thanks for your input.
Thing is though, I'm sure I remember being told that if you don't stay in teaching until your retirement age (69 I think!) your final pension amount drops rapidly. I must admit, I don't know as much about this as I should so I'm going to talk to someone about it. £200 is just such a lot every month.

Sleepyhoglet Sun 04-Aug-13 17:41:07

What % is that. I must confess I am in the scheme but don't know how much I pay out each month.

GetStuffezd Sun 04-Aug-13 17:45:10

I'm not sure - It's been approx. 200 this year and I'm on M5 (soon to be M6).

KateCroydon Sun 04-Aug-13 17:51:14

I think you might be confusing what happens if you retire early (eg if you wanted to claim your pension at 57) with what happens if you leave teaching.

Please don't opt out. It's almost certainly a very bad idea indeed.

Sleepyhoglet Sun 04-Aug-13 20:54:30

Out of interest, what career change are you thinking of? You say that's 10 years down the line, but if you don't end up leaving teaching then you would have been silly to have left the scheme.

PatTheHammer Sun 04-Aug-13 21:05:59

I think you can stay in the scheme but opt out of making your own monthly payments if this is what you mean op?

I opted out of making monthly payments when I went back after having DS. I had 2 small children in childcare and literally NO spare income at all.
Yet, I still get a yearly statement showing that I have a pension and that it is increasing yearly (although pro rata as I'm part-time).
Best to phone the TPS and talk to an advisor maybe?

Runningchick123 Mon 05-Aug-13 06:45:08

Why not just lower your contributions into the current scheme?

Zigster Mon 05-Aug-13 10:15:08

Don't opt-out of the TPS. Just don't.

I work in the pensions industry and we frequently scratch our heads in amazement (polite phrase) at people who opt out of "gold-plated" public-sector pension schemes like the TPS. Save cash some other way - if you are paying £200pm (gross) them you must be earning £30k+ (just checked and M5 would be £30k+). Live like a monk (nun?) for a year.

If you opted out of the TPS, your £200 gross contribution would only be about £135 after income tax and NI. You'd be giving up a really valuable benefit - one can argue about the exact value of the benefit but, roughly speaking, the total value is about 4 times what you pay so for every £200 you pay, your employer is paying in about £600. So you'd actually be giving up £800 of retirement savings in return for £135 now. Madness.

It's a hugely valuable benefit you receive. Don't throw it away.

GetStuffezd Mon 05-Aug-13 10:22:36

Thank you so much for all your comments.
Zigster, that's so helpful and really put it in perspective for me. I know my salary is decent but I'm struggling at the moment because I'm paying off old debts (which I know are my fault). My current take-home pay is about £1660 and the vast majority of that goes straight back out. But I will do my damnedest to see if I can tighten the belt in other ways. I've just moved house which means I will now spend about £50/month on fuel as opposed to £130, plus new place was water included so there's an extra £30 saved. So there's a start.
I genuinely didn't realise how valuable my pension was.

GooseyLoosey Mon 05-Aug-13 10:24:01

I too work in the pensions industry and second what Zigster says. It is probably the best opportunity you will ever have to save for your retirement - even after the proposed reforms are introduced in 2015. The schemes are being reformed because the benefits are currently so good and so expensive for employers. I would imagine that it is cheaper to service the debt than to give up such a good pension.

GW297 Mon 05-Aug-13 10:27:45

Agree with the others. It's a good pension and you'd be crazy to opt out of it.

ChessieFL Mon 05-Aug-13 10:33:59


As well as what Zigster said, you would also lose your death-in-service cover which is linked to being an active member of the pension scheme and this would pay out 2 or 3 x your salary if you die.

You can't stay in the scheme but stop your monthly contributions as someone upthread said - she still gets a statement but it's only telling her what benefits she built up when she did pay in. It will only be increasing in line with inflation. Once you stop paying into the scheme you don't build up any further benefits.

Anyone opting out of a public sector scheme needs their head examined (unless it genuinely comes down to a choice of that or feeding the kids).

gallicgirl Mon 05-Aug-13 13:01:21

Try for help with old debts.

HalfSpamHalfBrisket Mon 05-Aug-13 13:10:48

I'd recommend looking on for ways of reducing your debt - it's full of really good advice. You can even post your monthly outgoings and people will help you to see where you can make savings.

You mentioned credit cards- are you paying interest on these? Could you move the debt to the Tesco credit card and get 27 months interest free so you can pay off the capital/ your other debts?

Zigster Mon 05-Aug-13 13:53:17

One thing I found helpful when I first graduated (and had an overdraft coupled with a relatively low income) was noting every single penny I spent, cash in particular.

I know it sounds a bit tedious (and it can be). Certainly after a big night out there was often an entry along the lines of "Drinks" with the amount worked out as the difference between what I started with at the beginning of the night and what was left in my pocket the next morning.

But it really helps understand how money gets frittered away. An obvious example is coffee - a £2.50 cappucino every week day adds up to well over £500 pa. Even now I very rarely go to Costa/Starbucks/etc.

There are plenty of (free) apps out there if you a smartphone. I don't do it now so can't recommend one.

I use a similar approach with weight by using My Fitness Pal. It doesn't do anything by itself but helps me understand where I'm "wasting" calories and how to make better choices about the small stuff given a calorific "budget".

Viviennemary Mon 05-Aug-13 18:42:27

It would be very unwise to opt out of this pension scheme for a private one. Your employers are contributing to your pension as well. Put everything you spend on a spreadsheet. If times are really tough would you consider doing a bit of private tuition to clear your debts.

nextphase Tue 06-Aug-13 19:40:20

Can you look into the scheeme details for reducing your contribution? Make sure you don't reduce it sooo far your employer stops paying in!

Looking at it another way, if you were scrapped for cash, and someone offered you a £200/month reduction in salary, would you take it? And in reality it is likely to be a much higher contribution from your employer than you are required to make.

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