Pension, 43 and part time

[carrottopper]

I work 2 days at the moment. I'm thinking ahead about my pension. I don't really understand it all. I went on my pension website the other day and I have a pension from when I worked full time which is now frozen and my current one which happened to start when I went part time. I really don't want to increase my days but the prospect of just over £600 a month isn't great! I know this is the current value but it won't really increase. I'm hoping someone wise will tell me if it's worth increasing my days to top ip my pension or not. Our other option is to downsize and free some money up but then that's leaving less to our children.

Is your pension the TPT? It's always worth increasing your pension. As diminished as TPT is, it's gold compared to anything else.

You mention your children, but it makes more sense to look after yourself, you may have care needs in the future that eat into what you've earmarked for them.

I have 12 years in the 80% one and then the remainder in the current one

I'm hoping a property I rent out will give me options. It will be paid off when I'm 60

I wouldn’t be considering inheritance in any of my decisions - who knows what care etc you will need in the future, you simply can’t predict that and it seems crazy to live a really restricted lifestyle because you want to pass x amount on.

@carrottopper

I have 12 years in the 80% one and then the remainder in the current one

Ok. You have a fair bit to learn about the scheme(s) and there are some parts that depend on your service history. From what you say though I am going to assume you started teaching before 2007 and you have not been out of the TPS at any point for more than 5 years. (If these assumptions are wrong then what I say below may not be accurate). The one way you can drastically improve this pension is to get as high up the pay scale with TLRs etc as you can before retirement...this doesn't have to be through a full-time post as they use the salary a full-time employee would have. i.e. a UPS3 teacher currently on £41,604 would have that as one of their "final salary" figures whether they were full time or 0.8, 0.6...or even 0.05 part-time.

Starting before 2007 means that you went into the 80ths final salary scheme that has a normal pension age of 60.

As you are 43 you were transferred to the career average scheme on 1 April 2015. This transfer was illegal as the date of your transfer into the scheme was based on your age. This is known as the "McCloud judgement" and the result of which is that you are going to be allowed to choose which of the two schemes (final salary 80ths or career average) your service from 1 April 2015 to 31 March 2022 will be counted in. You don't have to choose until you come to retire and before being asked to choose you will be told how much pension each would give you.

Now, your final salary scheme isn't actually 'frozen'. It will use your final salary right up to when you finally finish working - just so long as you don't have a break from the scheme of more than 5 years. It is worth checking out something called the 'hypothetical calculation' if you have not had a break in service yet.

From 1 April 2022 you will, legally this time, be in the career average scheme. This scheme still provides a good pension. The more you earn the more it gets added to. One thing to bear in mind is that 5-year break rule again. In this scheme you get a bonus of 1.6% every year you stay in the scheme. If you leave for more than 5 years then that bonus is never added again.

@NotAnFA you seem so knowledgable. I don't really want to put everything on here. Can I message you in any way please?

I’m in a very similar situation…44 and been 0.5 for the past 15 years since my eldest was born. Recently separated so it’s really playing on my mind 😢.

@ChittyChittyBoomBoom it's tricky isn't it. Happy to chat via email if you know how to do it. I've had people contact me before from here but I've no idea how they did it.

@NotAnFA I am ups3. No break in service

@ChittyChittyBoomBoom

I’m in a very similar situation…44 and been 0.5 for the past 15 years since my eldest was born. Recently separated so it’s really playing on my mind 😢.

Your final salary will still come from your last 10 years (or from the 10 years prior to any break you've had) and it will be the full-time-equivalent salary from those years.

As a 0.5 part-time worker you will get half the pension that a full-time member of staff would get (seems obvious really!) but it the way this is done is to give you half the years worked as your "service" length. So 15 years on 0.5 will be counted as 7.5 years.

[quote carrottopper]@ChittyChittyBoomBoom it's tricky isn't it. Happy to chat via email if you know how to do it. I've had people contact me before from here but I've no idea how they did it.

@NotAnFA I am ups3. No break in service [/quote]
At the top of each message is a link labelled "message poster"

My pension that is 80% will take account of the full time work and management point I was on won't it? It's only this current pension that will be for the part time role I work

it will take account of your 'final' salary - I'm in a similar position was on a management point but stepped down to raise kids,

that said my salary now is more than it was then.. I find pensions quite confusing..

Very similar situation so this is helpful.

I did ring the pension company and they were v helpful explaining the calculators etc. for how to increase contributions.

I wasn't aware I could choose the pension?

@watingroom2

it will take account of your 'final' salary - I'm in a similar position was on a management point but stepped down to raise kids,

that said my salary now is more than it was then.. I find pensions quite confusing..

I am afraid YOU are at risk of falling for one of the BIGGEST mistakes in understanding the final salary scheme.

That is just because your salary NOW is more than it has ever been you are assuming that it is the BEST.

Inflation can upset this applecart.

Let me see if I can give you an example using the some salaries from the last 10 years. From the top of the upper pay scale these are two figures;
£36,756 and £41,604

Clearly the latter is more than the former, BUT that £36,756 figure was what was paid in the year 2011-2012.
The £41,604 is the current U3 pay in the year 2021-2022.

However, inflation since 2012 - up to April 2022 - has been 18.16%.
When that 2012 salary is adjusted for inflation, as it is when being used in the pension calculation, it become "worth" £43,431.

So, earlier salaries can be worth much more than current ones even though they were lower.

Now, a more recent set of figures.
Suppose this year was your first year on U3, that salary of £41,604.
It will probably be your 'best' but it has to have been in payment for a full year before it reaches that figure. So, by 31 August your "final salary" will stand at £41,604.
From 1 September we can expect a pay rise and the Government has proposed that U3 will rise to £42,852 (a 3% pay rise).
Note that this will not become your final salary completely until 31 August next year, that is 2023.
If instead we were to look at what might happen to the £41,604 figure if we just added inflation then it obviously depends on what inflation is...but if inflation were just 3% it would, by August 2023, MATCH the value of the pay rise!
Given that inflation is currently north of 6% then I hope you can see that this year's U3 salary will outperform the proposed new salary!

Now, interestingly, there is a rule you can use to your advantage called the 'hypothetical calculation'. It protects the pensions when someone opts out or leaves the scheme. If you were to opt out of September then your final salary pension will be based on the salary in effect on 31 August this year. This is an advantage as it will then be increased by inflation...and as inflation looks to be higher than any pay award this is very likely to produce a better pension.

You can opt back in from October to carry on building up more pension.

I am still in the pension and have never opted out. I'm not sure if you are saying I should opt out then opt back in.. I'm not really following sorry!

@watingroom2

I am still in the pension and have never opted out. I'm not sure if you are saying I should opt out then opt back in.. I'm not really following sorry!

Afraid it cannot be clear without checking your exact details as there isn't an absolute guarantee that what works well for one person will for another.

However, if you want to see if this is something you need to look into urgently I suggest you contact Dave Fountain via his blog or youTube channel.

What I also suggest is that you look at your statement.
If it says that method B is the best final salary THEN check the month/year that is the start of the 3 year period. IF that is March or April 2012 then you are very likely to be someone for whom this is an immediate issue.

Just want to say thank you to @NotAnFA, I stepped down from an SLT role in 2015 to classroom teacher so my 2012-2015 salary is definitely worth saving! I will look into this.

Anyone know if I do opt out for a month to stop these years being 'rolled away', what happens if in a few years time I have a 'better' three years- eg if I go back to slt?

@Clarabellawilliamson

Just want to say thank you to *@NotAnFA*, I stepped down from an SLT role in 2015 to classroom teacher so my 2012-2015 salary is definitely worth saving! I will look into this.

Anyone know if I do opt out for a month to stop these years being 'rolled away', what happens if in a few years time I have a 'better' three years- eg if I go back to slt?

The opt out creates an EXTRA calculation and does not stop your future salaries being used...you get the best of all the calculations so the only thing you are sacrificing is one month from the new career average scheme.

@Clarabellawilliamson I'm getting so confused. I was also SLT for 5 years then went to part time teacher due to family circumstances. My SLT pension is in my 80% pension

Did you go to the blog mentioned earlier? I thought this video explained it quite well-

https://dfountain.co.uk/the-fall-of-the-final-salary/

I'm going to speak to HR about opting out for a month- sounds simple but I bet you any money they f**k it up somehow!

[quote carrottopper]@Clarabellawilliamson I'm getting so confused. I was also SLT for 5 years then went to part time teacher due to family circumstances. My SLT pension is in my 80% pension[/quote]
There is no separation of your pension into the part where you were in the SLT and your part-time role. All of your teaching is in the TPS.

You clearly need your salaries from your time in the SLT to be used in the final salary pension calculation but in order to do that you either need to have a break from the TPS or to retire before 7 years since you left the SLT have elapsed.

@Clarabellawilliamson

Did you go to the blog mentioned earlier? I thought this video explained it quite well-

[[https://dfountain.co.uk/the-fall-of-the-final-salary]]/

I'm going to speak to HR about opting out for a month- sounds simple but I bet you any money they f**k it up somehow!

Opting out can be done by filling out a form directly on the teacherspenisons.co.uk site and the regulations state that it takes effect from the 1st of the following month after it was submitted.

Thanks @NotAnFA opting out looks easy, it's the opting back in that looks tricky! I emailed payroll about it and their response was "to b honest with you, I don't know how to do it" so that was helpful!

Why do you think you're only going to get £600 a month, is that because you've looked up your statement, and that's what you'd get if you retired now (not that that's possible)? The TPS doesn't project an annual payment at retirement like other schemes, so your annual pension can only increase in value with additional years worked. You have potentially more than 20 years left until retirement, if you stay in the scheme, your annual payment WILL increase (and by a lot) because your I've been paying in for longer. Every additional year you work adds to the pensions payment, when you say you don't think it will increase by much, that is incorrect. On the statement that is generated, the annual figure is what would be paid if you stopped paying in and took it at retirement age, it's not what you'd get it you kept paying in at your current rate. Don't leave the TPS.

@Clarabellawilliamson

Thanks *@NotAnFA* opting out looks easy, it's the opting back in that looks tricky! I emailed payroll about it and their response was "to b honest with you, I don't know how to do it" so that was helpful!

Opting in is via TPS as well :)