Help needed - TP pension decision

[Lilyargin]

I have to make a choice and cannot reach a conclusion. Have asked for IFA help but not got anywhere as they all say ‘it’s up to you’ - which I know it is but I want some kind of Martin Lewis to tell me what to do. These are my options:
£27 ish tax free lump sum + annual pension of £9,167 (so £763 pcm).
This monthly sum is liable to tax.
OR
£49,324 tax free lump sum + annual pension of £7,367 (so £613 pcm). Or anything in between - these are the two extremes.
The commutation rate (exchanging annual pension for lump sum) is 1:12 ie £12 of tax free lump sum for every £1 of annual pension you give up. I do not understand this at all but everyone says this is not good commutation rate. Obviously all this depends on how long you live. I know if I live for more than 12 years I will get more but maybe if I had a bigger lump sum I could invest it and make more in the long run. Also no-one knows how long they’ve got.
Also, how often do you get tax-free money?
Really need help!
Thanks for reading if you’ve got this far.

Another thing to consider is that the monthly amount goes up with inflation, whereas once you've taken the lump sum you've had it.

Are you on the fb group teacher pensions? And have you looked for David Fountain's youtube videos? He is an ex teacher, so can't give specific advice, but does explain some of the ins and outs of the scheme.

Wesleyan ( I think) give free advice for teachers on taking the pension- I took mine 3 years ago and they were really helpful.It also totally depends on your circumstances-for example do you still have a mortgage to pay off or other big expenses in which case may be worth taking a larger lump sum. And are you retiring and not working at all or are you just cutting down working days. Everyone’s situation is different -I’d recommend getting proper advice

Unless you are DESPERATE for £27k i'd do a hard pass on the lump sum

How old are you and do you have any other income? What are your monthly outgoings?

Take the smallest lump sum with the biggest monthly pension amount. Every April the monthly amount will go up by whatever the inflation rate was the previous September 1st. On 1st September 2025 inflation was 3.8% so on 1st April 2026 TP pensions will go up by 3.8% The monthly pension amount is the goose that lays the golden egg as each year your monthly amount will increase. A few years ago it went up by 10% as that had been the inflation rate the September of the previous year.

I'm in the situation and opted for the final teacher salary as a bit higher for both payments and lump sum.

The extra lump sum will be taken off your annual payments so I haven't done this.

Was given the figures but until actually paid I'm a bit anxious about the amounts as well. TPS is difficult to navigate and I'm hoping to trust tje amounts shown are true. Xxx

Personally I would take the max lump sum as who knows how long I'll live for.

I've seen elderly relatives have a high income after retirement which is great for the first decade or so but once they hit 80, they don't spend much and end up with a ridiculous amount of savings.

But, no one can answer for you. Neither option is the wrong one, it's what is best for you.

There's no choice on the £27k. That's the minimum lump sum you have to have. It's now much more you choose that's the issue. She can choose to take more but with a lower pension.

Are you affected by the McCloud judgement as this may give you different rates for the career average/final salary calculations?
As pp mentioned have a look for David Fountain videos on youtube. He covers most aspects of TPS and I think there's one in commutation.

If go for larger monthly pension as it's index linked so it will go up every year. £9k is an ok amount of private pension but I wouldn't like to retire on any less as no point being retired if you can't afford meals out, nice holidays, hobbies etc. and I wouldn't like to cut back on the value of gifts I like to give DC and dgc.

Definitely join and ask on https://www.facebook.com/groups/230186658803343/ the group @DrMadelineMaxwell suggested. Hugely knowledgeable admins, and David Fountain has created a series of spreadsheets and guides to help you model your options.

Thanks everyone, will watch the videos today and check out David Fountain.
Am 61 and still working (though not in a school). I have a very modest USS pension I am contributing to. I know that the monthly payments are index linked but it’s the thought of £22 extra of tax free money that tantalises.

£22K not £22!

For me, I want the smaller lump sum and the bigger income. Ive paid off my mortgage and have decent savings so dont 'need' a lump sum. And Im betting I live long enough - ideally lots longer! - to make it worthwhile.

My friend however plans to take the larger lump sum and smaller income because she wants to use the lump sum to pay off her mortgage.

We've both got another 10 years to go til retirement so that's our current thinking but obviously subject to change if our situations change.

Wesleyan said they couldn’t advise on this topic, annoyingly.

Remember that the lump sum is tax free, meanwhile the pension is taxable. There’s nothing stopping you investing the lump sum if you don’t need the cash.

If you take the higher lump sum you can invest it in stocks and shares in a high yield portfolio and get 6% income from it, and if you don't need the money reinvest the dividends and you capital will grow fast. It will be tax free if you put it in an ISA, which you can do over 2 years.

This is more than the inflationary increase on the pension.

Even if you didn't put it in s&s you can stick it in a savings account at 4% interest, which is better than the 3.8% increase on the monthly payment someone quoted above.

2 other big benefits of taking the bigger lump sum now.... One, if you die it's yours to pass on to family. Two, you will need morelneu when you're younger than when you're older and life quietens off.

So IMO you should take the higher lump sum.

If you have lots of other sources of income, and would be earning towards a higher tax bracket you may want to reduce your annual pension and take more lump sum. If you have any debts, take more lump sum to pay off those. If you are in poor health, take more lump sum.
if none of the above take less of the lump sum and maximise your monthly income amount. And invest the lump sum in an ISA (if you don’t need it for something specific) so that any gains you make remain tax free.

Noone can advise you as such because there isn't a right or wrong answer. It depends on your own offer, circumstances and attitude to risk.

I took the higher monthly income because:

• commutation rate wasn't great
• I would prefer not to have the responsibility to 'beat' and like knowing inflation linked rises guaranteed with the income option
• I am optimistic I will have a long retirement & win in the long run 🤣
• if I didn't, DH would benefit from a higher dependants pension
• I didn't have any immediate need for the lump sum
• ISA was full

Not in the TP scheme, but I took the maximum tax-free lump sum allowable from one scheme where the commutation rate was 1:26.

I'm in another scheme where the commutation rate is 1:12 and I won't be tempted by that.

Commutation rates of 1:12 are the norm across all public sector pension schemes - NHS, Civil Service, Local Government.

Depends how long you live i suppose.

It's a decision between potential length of retirement jam today. My mother's 89; my father died aged 72. If I go at 72 a lump sum would be better; if I go at 89, the higher pension would be better.

Shame Bet Fred can't give me odds.

I really appreciate you all chipping in and sharing your experience and thoughts. I have trouble deciding what pair of knickers to wear some days so this choice is impossibly difficult for me. (Exaggerating for comic effect but some truth there in my decisiveness capacity). I wish there was no choice as I’m so scared of getting it ‘wrong’.
I have about £35K mortgage left, still working, no debts and no health issues. My heart says take the bigger lump sum but my cautious head says don’t. A lot of stuff online says only hard-up people would take the bigger lump sum but people I know who are generally savvy with money say take the bigger lump sum and invest it. No experience with that. @stollenisthebest why wouldn’t you do that again? @Chewbeccayou’re right, no-one can advise me but I would like a few spreadsheets showing me various options but none of the places I’ve approached will do this. (Pensionwise, Wesleyan, IFAs). @Jopo12that is what I have been thinking and @JustMyView13yes! When do you ever get offered tax-free money? And @OSTMusTisNTyes, none of us know how we long we’ve got. But you three are lone voices. Thanks so much, everyone, I’m really grateful to you taking the time to comment on what is a bit of a boring topic. Still no further forward. Arrrrggghhhhhh!

Being scared into not taking the lump sum isn't a lower risk plan than taking the lump sum.

If you're scared of investing, then I highly recommend Martin Lewis's guide on Money Saving Expert ( I can't remember if I'm allowed to share links, but don't want to be suspended, so I'll let you find the link yourself)
Find the Banking &Savings menu, then click on Stocks and Shares ISA.

He's got a step by step guide on there and that will help you decide whether to do it or not.

You don't have to go the route of a high yield portfolio, you can just choose 2-3 index tracking funds that are low cost, have a geographical spread, and you will see good growth over 10+years - typically 7-8% growth after inflation, but 2025 was even better than that. The risk of S&S is having to cash them in in a hurry when the market is low. So you want to invest long term to ride any big dips in the market, and have enough cash that if you have a big expense in your life (new boiler, new roof) you aren't forced to sell when the market is low.

My son's ISA is in an HSBC Footsie 100 index tracker, a Legal & General US Index Tracker, and another tracker following European stock markets excluding UK. He's getting 10-15% growth pa.

Anyway, good luck whatever you decide!