Pension - is buy out worth it?

[bridgetjonesmassivepants]

I'm part of the generation of teachers that have been affected by the McCloud judgement and now have a window of opportunity in which to 'buy out' extra years. As I understand it this means that I could claim my full teachers pension at 65 instead of 67/68 if I make extra payments.

However I plan to stop teaching in around the next three - five years (I'll be 50ish by then)

Anyone know if 'buying out' these extra years would be worth it? Can I do this in the three - five years that I have left in teaching? I intend to talk to a Wesleyan advisor but thought someone might know - it all seems very complicated!

No advice but have the same issue so will be interested to see any answers.

Sorry no advice but was very interested to see this on my email, heading towards sixty and not sure I can hack it until 67.

I'm in the same boat, and from my rough calculations, I think it would work out well for me. I've run the TP calculator and a three year buy out would cost me just under £1k a year. My projected pension (atm, so ignoring potential pay increases), is £23k per year, from 68. Taking it at 65 therefore means I'd be getting an extra £69k. If I saved and invested £1k a year until 65, I'd only be looking at about £45k, using an online investment projection too. What I'm less clear on is whether buying additional pension, or opting for faster accrual, would work out better financially than the buy out, if I presume I'm retiring at 65. I really can't see how I could teach beyond that, and I may well return earlier. I'm in the NEU and Lighthouse offer a free initial financial advice consultation for members, so I'll see what they say before making any decisions.

*retire, not return.

Thank you for that info Hailybuns. Can I ask how you work out your projected pension if you stay in teaching? I know my pension at the moment would be £7,500 as I have always worked part time and I'm now 46 and currently up to 0.8. Have no idea how working for the 19 years at 0.8 would improve my pension.

In other words, is it worth sticking it out for as long as possible or not?

Sorry, Haileybells not buns!

No problem @bridgetjonesmassivepants . There's a calculator here to estimate annual pension, based on current salary: https://www.teacherspensions.co.uk/members/calculators/estimate-your-final-pension-value.aspx

I've been thinking about this too for the last few days since the email, but I've no idea whether to do it or not. Mine is just under £1000 a year for the buyout, but I don't know what happens if you don't stay in teaching for that long? What if you only pay the £1000 for ten years, for example, instead of all the way to 65? And like a PP said, how do we know if buying additional pension would be better? I wish this was easier to understand!

I don’t understand any of this at all. Where is the information, and when do we have to decide by?

There isn't really that much information bar what's in the email, and a few calculators (e.g. projected pension, buy out costs) on the TPS website. I think most people would really need to speak to a financial advisor.

I didn't know about this and not really sure what is happening. When is the deadline?

Which people are affected by this please? I'm 41 and have a couple of years in the original scheme then moved over into the current one.

@winewolfhowls same here

Thank you Hayliebells for the link to the calculator. I think it says that if I worked four days a week for the next 19 years then I would get an extra £16,000 on my pension. Not sure if I've got that right and I'm not sure it's worth it. Can't image being in a classroom for another 19 years, that sounds horrific.

I have an appointment booked soon with a Wesleyan advisor so it'll be interesting to see what he says.

It is all so confusing. I am just lucky as I had quite a few years off to look after my kids but returned just in time to still benefit from the McCloud judgement. I say benefit, I am not sure what the difference will be yet.

Hmmm, checked the Teacher's Pension website for how my pension has been affected by the transition and it has gone down by a thousand a year! The benefit is that I can access my measly sum at 60 instead of 67.

My lump sum has gone up by £6000 though. It really does seem as though they have just pulled numbers out of thin air, don't understand it at all!

Last week you could see ONE of the 2 choices available at retirement. now you can see the OTHER option available.

Baiscally, for the period 2015-22 you were on the new scheme which accrued at 1/57 of salary (better than old system) but had a retirement age if 67 (worse) and didn’t accrue a lump sum for that period (worse)

Youre now being shown the old scheme weve been returned to. It accrues at 1/80 of salary (worse) but means you can have full pension at 60 (better) and get a bigger lump sum too.

Most experienced teachers will choose to have a slightly smaller yearly pension, but available at 60. This is because in those 7 years, you will receive a LOT of oension, as well as the bigger lump sum and be better off.

However, you do t have to take what’s being shown today. At retirement (and from next year) they will be able to show BOTH options and you can CHOOSE which is best for you. So if you want to keep working to 67 and don’t want a bigger lump sum, you can go for the career average scheme which accrued a bit faster between 2015-22. But most teachers don’t want to work to 67. For most, this change means they can get much more if their pension at 60, as well as a bigger lump sum. For most, this will mean they can retire sooner than if they only had the pension earned up to 2015 available to them up at 60.

It is tricky to compare as now you can’t see the old statement (unless you saved it) and lots of people think they are suddenly worse off…but they are mostly better off.

Thank you Wombat chocolate. I will recoup the lost £1000 and will appreciate the extra £6000. After 13 years I will be a £1000 a year worse off though.

I think it's more the psychological effect of my pension dropping below £7000 a year. In my head that was ok but £6000 for some reason sounds bad!

Luckily my husband will have a very good pension but I want my 'own' money too.

Thanks @WombatChocolate really helpful post.

Loads of info on the Teachers Pensions - Teacher to Teacher (U.K.) Facebook group about this very subject.

David Fountain is a member on there too giving loads of great advice.

My lump will increase by £11k but my pension at the moment is down by £2k but going on TPS and looking at the calculations/calculators on there I'd be better off opting for it all to be in Final Salary.

Retiring in 3 years (would go tomorrow if I could) totally lost my spark after 28 years of teaching. Just can't be bothered with all the stupid faff.

Came on to say you should look for Dave Fountain videos on YouTube. He's done some great work breaking things like this down.

If I remember right, the gist was that if you do faster accrual/buy out (and I can't remember exactly which one, or if it even made a difference) then you don't break even until mid 80s. In which case, probably better to stick some money into a LISA and subsidise yourself that way if/when it's needed.

I've discovered since the TPS has been updated this week in light of the McLeod judgement is that the pension I can take at 65 has now doubled. So the buy out is now worth less, but granted I haven't run the calculator again to see if the contributions are now also less. It may well not be worth it, but I think I'll still check with an IFA.