Pay into DC pension or faster accrual into DB pension?

[Jellykittens]

I've just re-done my monthly budget, and have freed up enough money to put £200 per month extra into a pension. I'm currently in the TPS (teacher's pension) on the career average arrangement, which apparently means I accrue that pension at the rate of 1/57. I can also "buy" a faster accrual rate of 1/45. As well as the TPS, I have a private defined contribution pension with Aviva from a previous job.

Is it better to spend the £200 per month buying a faster accrual rate, or to put it into the Aviva defined contribution pension?

I know defined benefit pensions are generally supposed to be better, but I don't know whether it's good to also have a defined contribution pension. I'm thinking perhaps I could pay the £200 into the Aviva defined contribution pension so that I can retire early - and frugally - on it, without taking the hit for early retirement on the TPS pension? Or as a back-up in case the TPS pension goes bust?

My salary is £32k and I'm 39.

A couple of things to consider are that if you take the DB pension early, although you get less per year (actuarially reduced) you obviously get it for much longer and it usually takes until well in your 80s for you to be ‘worse off’ and by then you’ll have your state pension too. So it’s not purely a monetary decision as if squeezing the most £ out, but also to do with when you can stop work and how you value that.

The DC pension won’t have the benefits of being index linked or having death in service benefits associated with it and by the time you retire, you’ll have to be 58 to access it, so that’s something to consider. The DC pension will also be invested on the StockMarket and so has more risk attached to it.

That said, you already have your good DB pension, and that will provide you with the bulk of your core pension needs along with the state pension. You could see the DC pension as an extra and yes it can be used to bridge the gap to state pension age.

I’m about 10 years older than you and in same sort of position. Because a large chunk of my pension is in the final salary scheme I can take at 60, I’ve got less of a gap to bridge. I plan to stop work around 55 and my DH will find both our living costs until 60, when I will get a large proportion of my DB pension. My lump sum (automatic in the final salary scheme) plus a couple of DC pensions and ISAs will help bridge the gap to 65 for myself and DH, when his DB pension will pay out and from 67 when we will get state pension, we will be pretty well off.

If you think you’d like to leave the DB pension where it is until it pays out in full, having something in DC can give you added flexibility. It partly depends on your overall household retirement funding and if it’s just you or you have a partner and what their pension provision is like and will pay out. I think if it all in household finance terms, but I know lots of people don’t.

If you search online for DiddyDave, you will find a retired teacher who has a blog about teacher pensions and answers questions just like yours. I think you’d find it really useful.

DiddyDave posts as DiddyDave and his name is Dave Fountain and his blog/website is called The Classroom in Rear View. He’s a retired maths teacher and has lots of spreadsheets set up where people can input numbers to see different possible outcomes from faster accrual, defined contribution etc.

Thank you Sooooo much @WombatChocolate that site is exactly the information I've needed as someone with 20 years in TP and wrestling with with a similar dilemma to OP (but a fair few years further one and with a small SIPP)

I'm sorry, I managed to lose this thread somehow! It's popped back up now so I can see it again.

Thank you @WombatChocolate, that's so helpful. You're right that it isn't just about the actual money, but about the freedom to go part-time or stop work early. I genuinely don't see myself making it full-time to 68, or whatever the retirement age will be by then.

The DB pension calculator gives me quite a low forecast for if I take it at 58, I suppose because I'm reducing years paid into it and taking money out. I think boosting the DC one and living off that for a few years might be the best for me.

I've found the DiddyDave videos (they're at www.youtube.com/channel/UCOdIEXubpfIRkFvPZ57KITQ @SweetLathyrus, if you're looking too) - these look like exactly the sort of questions I'm trying to figure out.