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Any teachers opted out of the pension scheme?(32 Posts)
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?
Your employer is contributing 14% of your salary to your pension. That is part of the package of rewards that comes from being a teacher, and by heck you earn it!!! If you opt out of the pension scheme, it's akin to volunteering for a 12% pay cut.
That's not to say its easy to keep paying it. It makes me pretty cross when people make out that it's just short-sightedness that makes people give it up. As someone upthread implied, sometimes it's the only cloth left to cut, and if its a choice between paying the pension and feeding the kids... Well. And for those people who suggest reducing contributions... That's not how it works. It's all or nothing, a flat rate based on your solo income without reference to household circumstances or financial commitments.
However, it really should be almost the last thing you think of cutting. We did without a car for two years so we could keep paying our public sector pensions. Hopefully you don't have to go that far, but maybe there's room for you to downgrade? When did you last shop around for insurance and energy suppliers? Can you be stricter about gas and electricity use and cut those bills by £20/ month? Can you swap your debts onto an interest free credit card (check out the guides on moneysavingexpert... It helped me axe my overdraft for good). Do you meal plan and stick to it? Are there any coffees/magazines/lunches out you can cut out? Sorry if this seems a bit miserable... We are living in straitened times. I just think you need to look at all the other options before you make a decision you are likely to regret.
One major pension fund is currently offering a 2.5% return index linked on annuities. So for every £100K savings this pension is £2,500 per annum. You would need an eye watering fund to generate an index linked £25K pension. Don’t move.
I am well known as somebody who slags off the pension industry
If you have a defined benefit scheme
ie your pension is related to the amount you earned and the number of years you worked STAY IN IT
the other type of scheme - the ones I loathe and detest are called
defined contribution schemes
these are where you hand a load of your money to the men in shar suits, they invest it and take their fees and pay you a pension out of what is left, the value of which you will not actually know till the day you retire.
the well known defined benefit schemes are
- local government
- civil service
- a couple of PLCs
the last remaining "gold plated" ones are
- directors of big companies
A friend of mine who is a teacher found out that his pension was worth MUCH less than he expected because he took out something called an FSAVC - an additional saving scheme which ended up devaluing the pension. He found out that it was misold and got compensation. Here is some info -http://www.fsavc.uk/What%20is%20an%20FSAVC.pdf
Seems loads of teachers have been ripped off!
think about it. the TPS is nowhere near as good as what it used to be.
private pensions are a joke.
the TPS relies ENTIRELY on the good will and decisions of future governments to pay your pension. a little research beyond what MPs and the daily mail will have you believe and you will realise that the country is flat broke. it is my belief that there is a slim chance that you will get what is promised. if you do get the pension there is also a chance it will be not hat is promised with worse terms than present. then there is inflation that devalues it. plus if the worst happens the state pension will become means tested so the people whove done the right thing and saved will be no better off than the lazy and feckless that havnt.
if the govt tells you to do one thing then do the other is the best advice i can give. theo paphitis on the radio plugging the workplace pension was the moment when i decided "im out"
do your due diligence the best you can and try and predict what state the nations finances will be in when you retire. as my HR person told me the other day. " there is no TPS fund" the "fund" relies on payers into the system and then on govt subsidies to take up the shortfall. there is no TPS fund
That's rubbish. The TPS is currently a net contributor to the treasury and is financially healthy. The recent reform was ideological not out of necessity.
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