The TPS website has lots of explainers on it - short videos.
They explain what the Final Salary Pension is, Career Average, McCloud. This, plus accessing your Pension Statement and looking at the explainer which goes through what the different elements in it mean, an give you a lot of info, if you give some time to it.
I think that the vast majority of teachers are perfectly capable of understanding the main points of it. What it needs is a bit of time - even just a couple of hours will give you a basic understanding of it. Even if people read this thread carefully, they’d get a basic understanding.
I think Pensions are a bit like Maths. Lots feel sure they can’t understand them, but with some useful info and explanation and importantly some time, they can understand the basics.
McCloud is the judgement that means teachers who were in service in 2012 and still in 2015, who were moved into the Career Average scheme in 2015 (which is what shows in your pension statement at the moment) will have a choice WHEN THEY TAKE THEIR PENSION as to whether to have the period 2015-22 years if service counted as being in the old FinalSalary Scheme OR the new Career Average Scheme.
As mentioned up thread, the pension statement doesn’t show this yet or the implications for individuals.
At the moment, the pension statement can only show final salary entitlement to 2015 and career average from 2015.
You can see the difference choosing Final salary for those 7 years 2015-22 will make. The calculation is your Final Salary (identified on your Pension statement - it will give you the best if Method A and B) divided by 80, multiplied by years if service April 2015-22. You can then add this to the final salary pension already shown for up to 2015.
The lump sum gained at 60 (if that is your normal retirement age) will be 3 x that.
Because the final salary scheme accrues at a lesser rate 1/80 of salary, whilst Career average is 1/57, the yearly pension by going for Final Salary will probably look less. BUT what you have to remmeber is that the Final Salary pension can be taken without reduction at 60, whereas the Career Average will be your state retirement age. Also it has no lump sum.
So, most long serving teachers with a decent chunk in Final Salary will benefit from McCloud and choosing to move 2015-22 back to Final Salary (no choice needed now - just when retiring) because they will be more able to retire sooner…most don’t want to work until 67. Some might need to.
Probably in 2024 the TPS pension statements will be updated so everyone can see the impact of the 2 options. Currently it’s not possible for them to do that. As I say above, you can easily do the calculation if you want to.
Other things that might help people thinking about all this;
- consider how much you need to live on in retirement. Most teachers have paid off their mortgage and will no longer be making pension contributions or paying lots of tax, so can live on significantly less than their current salary.
- rememeber you will have some state pension. Go online to check your forecast. A full state pension from April will be £10k per year.
- If you feel you can’t keep going until 67 or when your oensions pay out, remmeber you can take them from 55 or 57 for career average for those reaching 57 after 2028 - the yearly amount you receive is reduced by around 4% each year because you are getting it for longer.
Key things to work out are what you need to live and what you will be receiving.
Various sites such as Which? and most pension providers have info to give suggested requirements for basic, moderate and luxury retirement for singles and couples, which lots of people find useful.
Teachers are perfectly capable of understanding this stuff. Many people struggle to get started or to prioritise putting 2 or 3 hours into research and that’s why they do t understand it…it’s actually because they haven’t actually looked into it. But rest assured that all of you are capable of getting to grips with it. It is important, and you might find that like me, it’s strangely compelling and you’ve become very interested in it. For me, it’s given me the realisation that with a few tweaks, I will stop work sooner than I might have thought. That’s got to be good news!