2k a year pay rise = £66 extra a month!

[missbunnyrabbit]

I'm a teacher and was so excited to go the next point on the scale. Checked my pay today, the first pay with my new salary approved on it, to see I get a grand total of £66 extra a month!

2k sounds like such a lot! But it really isn't after everything is taken off.

Am I being ungrateful?

Aha okay yeah I get the inflation point now, duh. From looking at it again, it would be more like 75k lump sum and 25k income in todays terms which is still pretty good compared to most in the private sector. It’s definitely worth the monthly payments now when you’re younger because you’re unlikely to find anything better privately if you lose out on the employer contribution.

listentotaxman.com/
is an excellent site for checking gross to net deductions; I'm an accountant, and it's always the first thing I use rather than wotking it out myself.

Just be thankful that you're not receiving universal credit - the marginal clawback on that is really punitive.

If you're in a gov't funded role, your salary comes out of everyone's tax and NI - makes it difficult to complain about it.

Does anyone know whether the calculator projections on the Teachers Pensions site are in 'today's money' or take inflation into account? I rang and emailed and was told both times that it is in today's money but some posts here suggest otherwise.

JinglingHellsBells

@GCAndProud So your pension will be 4/5ths of your salary of £50K plus a lump sum of £270K? I think you have miscalculated somewhere.

Yeah it does sound high but that is what came up and I did check quite carefully that I put in the correct info. Someone else is welcome to try doing the calculation using my details if they want to. I’m FT with no breaks, born in 1984 and earn 51000. I joined in 2013. I’ve not accounted for my salary increasing since I joined but I’ve equally not estimated any pay rises during that period.

The teachers' pension scheme changed in 2007. Although there was an automatic lump sum of 3x annual pension in the pre 2007 scheme, if you only joined in 2013 you do not have an automatic lump sum. Part of the annual pension can be commuted to lump sum at a rate of 1:12, i.e. giving up £1,000 of annual pension will give a lump sum of £12,000.

That lump sum does not make sense.

You are allowed a lump sum of 25% of your pension 'pot'. So someone with a £1M pension pot can take £250K max, tax free.

That sort of figure you're quoting, in today's income, applies mainly to anyone on a minimum salary of £100K with 45 years of pension contributions.

I know teachers with 45 years' work, full time, and their pensions are nothing like £50K.

@JinglingHellsBells

That lump sum does not make sense.

You are allowed a lump sum of 25% of your pension 'pot'. So someone with a £1M pension pot can take £250K max, tax free.

That sort of figure you're quoting, in today's income, applies mainly to anyone on a minimum salary of £100K with 45 years of pension contributions.

I know teachers with 45 years' work, full time, and their pensions are nothing like £50K.

Surely also depends on the rate of contribution? Members of TPS pay in about 25% of their gross salary per annum (10% from employee and the rest from the employer). So my contributions and therefore the size of my pension would be more than someone on a higher salary who paid in less. When I worked in private sector, my employer paid 3%

@twominutesmore

Does anyone know whether the calculator projections on the Teachers Pensions site are in 'today's money' or take inflation into account? I rang and emailed and was told both times that it is in today's money but some posts here suggest otherwise.

Interesting. I have been told in clear terms on here that it’s not today’s money 🤷‍♀️

@Goinghome20

Well at 54yo I have found out that teachers pensions are actually not that great.

Been teaching for 23 years. 9 years FT, 14 years PT. If I retire at 60 I will get 6k a year and yes our monthly pension contributions have gone up a lot over past 4 years.

Lots of young teachers dont bother now as they need that money for rent, and I kind of wish I hadn't bothered either now.

But £6k a year is £500 a month - far more than you put in! What did you expect?

Is ‘career average’ worked over the x many years of service or average of the last three years of service?

Over a 40 year stretch is quite a thing.

@missbunnyrabbit

Thanks for all the replies. I've plugged everything into a few different calculators and there's some variance by 20 or 30 pounds. My NI is higher than it says on the calculators, but then I did the government one specifically for that and it came out right. Also my tax code is 1257L/0, but my tax paid matches the calculators so I'm guessing that's right.

Also I've had the backdated pay, that was included in last months, so this month's pay should be the correct salary.

Sadly it does all seem to be right. I'm just so disappointed!! Never ever thought I would consider touching my pension but....I am. Maybe.

But it's £166 gross pay rise per month, it's fair enough that you get around £87 of this and more into your pension. What had you expected to get into your hand out of the £166?

@JinglingHellsBells

One issue that people forget is that in very few private companies do employees get an automatic pay rise simply for being in the job for longer. This tends to be a government/public sector 'perk'.

Most private companies review salaries on merit and performance and may give a cost of living annual increase but it's never guaranteed.

Exactly this! And to me that is a massive pay rise. I got £200 extra a year in my last payrise. After deductions I could just about buy myself a half of cider a week (or was it a month?) A lot of my colleagues got nothing at all. Used to be in the NHS and loved my incremental pay rises as well as a yearly cost of living one

@Goinghome20, so have I got this right?

If you take retirement at 60yo, you will have accumulated a total of 29 years service out of a potential 40 years (if this is the period time required to get full entitlement of x/y or 5/8ths of your averaged out pensionable pay?

Which by my ready reckoner is roughly 45% of the ‘average’ of your pensionable pay.

So it seems that the lower salary of your part-time hours & the fewer ‘years’ will take a lump crunch out of your projected pension.

Have you checked out the pensions scheme’s T&Cs? In your remaining 6 years, can you buy some extra years so that you can leave with closer to 40 years to get the full 5/8ths (?).

AVCs are a smart move as you get tax relief immediately into that investment vehicle.

As an aside, we should all seek to gain our own financial independence & that means getting to grips with the nuts & bolts of what we do with the money we earn.

My mum was a very hard working dedicated teacher, gifted at her subject & much admired. She got a severe kick in her teeth when she went to claim her pension to find that paying a married woman’s stamp all those years ago left her with the paltriest of pensions. She had to claim income support etc just to get by & she was ashamed of that as she had worked so hard. I learned my lessons about money from that.

If you have a public sector pension, make sure that you are making very good use of it & gearing it now to yield either an earlier retirement &/or a better pension. It is a valuable asset.

@UniversalAunt

Is ‘career average’ worked over the x many years of service or average of the last three years of service?

Over a 40 year stretch is quite a thing.

I’m in a private company scheme, but to give you an idea… Each year I accrue another year at the salary for that year, so let’s say I earn 1/60th per year, and my salary is £30K - I’d have earned £500 per annum for life after retirement. Of course, in 20 years time, £500 won’t be worth what £500 is now. So each year, that £500 is increased by a factor that is linked to inflation. I say linked - it’s the higher of several measures, but has a cap as the company can’t have unpredictable liability if inflation spirals. The cap is 2.5% - it can be reviewed, but that’s the guaranteed maximum increase. So it is in theory protected from inflation.

@universalaunt yes that's it in a nutshell I think.

Sorry hear what happened to your mum. I was always told teachers pensions were good so I got a shock when I got my most recent projection. Not sure what I was expecting but more than that! Can you tell I am not a Maths teacher?

I think I am going to look into AVCs so thanks for that reminder.

I will need to work until I am 65 if I can.

“I was always told teachers pensions were good so I got a shock when I got my most recent projection”

But £6K index linked for life, 7 years before SPA, when you’ve only worked part time for more than half your career is good 🤷🏻‍♀️

One issue that people forget is that in very few private companies do employees get an automatic pay rise simply for being in the job for longer. This tends to be a government/public sector 'perk'.

Most private companies review salaries on merit and performance and may give a cost of living annual increase but it's never guaranteed.

That is very true. I used to work in the private sector and we'd get no annual or cost of living salary increases. Although I could potentially earn more in the private sector in terms of gross salary (but probably not loads more), I also need to factor in the employer contribution which is actually a whopping 23.6% (it used to be lower). That's a huge amount and added to my own 10% contribution, it's over a third of my salary per year going into my pension. That's why I'd never opt out of the pension scheme, even though it would give me a few hundred more a month in disposable income.

Cocomarine well that's your opinion.

I cant live on £6k a year, and state secondary teaching in my 60s will be tough.

Yep - not sure what your AIBU is but £2k pa = £167pcm gross. Take away all the deductions (inc Teachers Pension) and hey presto you've got an extra £80ish a month.

Just like everyone else who might have got a similar payrise. You could get more take home pay if you opted out of the TP, bu then you know that's a bit daft as it's one of the best Pension Schemes available.

Anyway, £2k extra a year looks great doesn't it - but that onion always gets peeled down through taxation; and then without taxation how could we pay our Teachers and contribute to their pensions without it?

Or Firefighters or the NHS?

So OP, rather than think of your taxes as paying towards your own salary, just think of the Firefighters and Nurses that you're paying for too.

@Gcandproud What you and your employer are putting into your ‘pension fund’ is irrelevant. Teachers Pensions are a defined benefit scheme - what you will get in retirement is defined. In respect of the 2015 scheme each year you work full time you will add 1/57th of your annual salary to your annual pension in retirement which will be revalued every year by a measure of inflation.

@Goinghome20

Cocomarine well that's your opinion.

I cant live on £6k a year, and state secondary teaching in my 60s will be tough.

You won't be living on £6k per year unless for some reason you don't qualify for a state pension

Surely also depends on the rate of contribution? Members of TPS pay in about 25% of their gross salary per annum (10% from employee and the rest from the employer). So my contributions and therefore the size of my pension would be more than someone on a higher salary who paid in less.

@Gcandproud You've still got it wrong. Some friends of mine who taught full time for 40 years are now on pensions. They were HofD
or snr roles and earning around £50K . There is no way they are getting £50K pa pension.

I cant live on £6k a year, and state secondary teaching in my 60s will be tough

@Goinghome20 There is nothing to stop you setting up your own private pension, contributing each month or an annual lump sum. And up to the age of 75 the government gives a tax break and adds on 20%.

You will also get the state pension, currently around £10K pa.

Also @Goinghome20, a lot depends on how much work you do. Part time can be anything from 1 day a week to 4.5 days.

If you work on a 0.5 contract then your 14 years PT equates to 7 years FT. If you work 0.4 the obviously it's less, and so on.

@Goinghome20

Cocomarine well that's your opinion.

I cant live on £6k a year, and state secondary teaching in my 60s will be tough.

Who’s expecting you to live on £6K a year? You’ve got £9300 from a full state pension expected too, no doubt. So it’s pretty disingenuous to suggest that £6K is to live on.

Yeah, secondary teaching is tough in your 60s. It’s not exactly easy in any decade. I doubt many MNers expect their job to be easier in their 60s.

Not exactly accurate though, to suggest that £6K is all you’re getting for your contributions though - when you’re actually entitled to more, but presenting the figure for taking it early.

And if you can’t live on £15K, you need to re-assess making part time contributions now. You can’t have both things - part time work, full time pension in the future.

So yes, it is my opinion that £6K index linked pension taken early is almost certainly a very good deal for what you’ve paid in. I think if you look at those figures you’d have to agree with me.

Fair enough to wish it was more - don’t we all?! But you can’t complain that it’s not good.

@Goinghome20 I'm afraid as a part time teacher myself, I've got to agree with @Cocomarine on this one. Working part time is an absolute luxury. You've had the reward of that extra time- I'm afraid now you have to deal with less cash in your pocket. If you didn't plan for that and are going to struggle then more fool you. If however you're just going to have to look at your outgoings more carefully then I would suggest you appreciate the fact that all of those extra non working days you had are worth more than a decrease in luxury purchases and holidays now. Time is more valuable more money- I know this which is why I'm also choosing to work part time!