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After retirement...

Discussion in 'Retirement' started by richest1, Oct 17, 2019.

  1. richest1

    richest1 Occasional commenter

    I will be going back to work 3 mornings per week for a local academy, with auto enrol on too a second pension after taking my first.

    Is it worthwhile too purchase added pension via this second pension financially, is it a good deal etc?

    I am a standard taxpayer.

  2. rooney1

    rooney1 Occasional commenter

    I took my first pension two years ago and then went back to work. I don't do much work but it probably averages out at about 0.1 to 0.2 of full time. I do contribute to the new pension scheme. It won't bring me alot of money at 66 but every little helps. One reason for still contributing is the death in service benefit. My main problem has been having to ensure that my employment record is accurate. I'm on zero hours contracts with two different employers and when I was trying to sort out my record one of them said that I hadn't done any work for them in this period. I had to tell them what was shown on my pay slips! I'm still waiting for the other part to be corrected but I think it's a task in progress now. Keep your pay slips and check your employment record
    richest1 likes this.
  3. richest1

    richest1 Occasional commenter

    Thanks, I have a contact for my hours, so it shows up on the TP website.
  4. diddydave

    diddydave Established commenter

    Quite a few variables to look at in order to work out whether it is a good scheme or not, so I'm afraid you'll need to find someone you trust or get your head around the figures yourself as everyone's situation is different.

    One comparison to consider is how it compares to other savings/investment schemes. Bearing in mind that you've just had your pension, presumably with a largish lump sum, this may be something you've already some experience with. As you'll be getting the tax boost as well the additional pension may be attractive.

    Try the calculators here: https://www.teacherspensions.co.uk/members/calculators/flexibilities.aspx

    For example in the additional pension, for my NPA of 67 if I want £1000 extra it will cost me about £13,000. If my wages are £25,500+ then that £13,000 will cost me £10,400 and the tax people £2,600 (reclaimed from them at the end of the tax year).

    But I have to wait 14 years to get it so I am losing whatever investment return I can get on £10,400 (compounded over those 14 years)...but with 'safe' investments I am unlikely to be getting better than the inflation figure so the actual buying power of my £10,400 is actually very likely to be going down.

    However, the £1,000 of extra pension is being increased each year by inflation so its buying power remains the same. (the additional pension doesn't benefit from the 1.6% additional boost that career average accrued benefits get)

    The 'faster accrual' flexibility has a maximum of 1/45th of my earnings so there is a limit on how much this can be used. For my salary of £25,500 this would cost about £2000 (£1600 from me and £400 from the tax) for the year and add about £120 to my pension. However, this would benefit from the extra 1.6% boost above inflation each year that I continue to work.

    So for comparison I'd look at £1 of extra pension (ignoring the 1.6% boost)
    Additional Pension costs £10.40
    Faster Accrual (1/45th) costs £13.33

    Taking into account the 1.6% boost I think, because I've not checked the theory on the maths fully, that means it would take about 16 years before the 'value' of the Faster Accrual would overtake that of the Additional Pension.

    So if you live for 11 years after taking the additional pension you are 'in profit' thereafter...unless you can find an investment that beats inflation
    Last edited: Oct 18, 2019
    plot71 and richest1 like this.
  5. richest1

    richest1 Occasional commenter

    Thanks so much for that, superb work, which i will study.
  6. Kandahar

    Kandahar Star commenter

    It is certainly a muddling area to consider - and I would advise that you get some good professional advice - since you might end up working for little or nothing if you are not careful.
  7. richest1

    richest1 Occasional commenter

    Will do, cheers.

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