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BUYING MORE YEARS?

Discussion in 'Retirement' started by sophiegee, Jul 3, 2011.

  1. I hope someone can answer this question for me. I will be 55 in 2012 (next year) and was looking at leaving then with a reduced pension etc; but when I looked at the info for leaving at 60 it was a considerable difference. Now, I don't want to work til 60 but could I BUY 5 years of contributions from the TPS people? or does it have to be privately arranged with another company? thanks for any advice - it is a mine field!!!
     
  2. You can no longer buy additional years but you can buy extra pension in lumps of £250 from TPS;
    http://www.teacherspensions.co.uk/resources/pdf/Leaflets/Additional%20Pension%20Leaflet.pdf
    Don't know about private alternatives but you would need to consider the set up fees which may work out rather expensive over such a short time scale.
    Another option might be to delay taking the reduced pension straight after you finish work. If you can live off your savings for a short period you could finish up with a higher pension and lump sum.
     
  3. The basic rule for taking your pension early is that you lose 5% for every year early you take it. So I am taking mine at 56 so a 20% reduction. BUT I am receiving 80% for an extra 4 years so I think it's worth it. I won't be worse off for many years to come and by then I'll have got used to living off a lot less money, my state pension will have come in so my income will have improved a bit and I won't care.
     
  4. To buy extra costs huge amounts! I thought about it for about a millisecond!
     
  5. thank you all very much for yours answers; but can I ask colinwatson a question - have I interpreted this right please? can I in effect therefore 'freeze' my pension until I reach 60 and recieve a greater amount pension and lump sum - WITHOUT - paying anything more in? thank you all.
    I really have had enough with all that is going on at work and now the dreaded academy has been mentioned!!! I know that I am still quite young to retire but I do want to enjoy life!!!
     
  6. Lets assume you finish teaching on £40k with 20 years service at 55 and inflation (CPI) goes up 10% in the next 5 years.
    If you wait untill you reach 60 to draw the pension you would get a pension of £10k + 10%=£11k and a lump sum of £30k+10%=£33k.
    If you draw the pension at 55 you get £10k-25%=£7.5k pension and £30k-25%=£22.5k lump sum. The pension would increase with inflation to £7.5k+10%=£8.25k at 60.
    Ignoring inflation and tax, taking it at 55 gives you a 'profit' of £7.5k x 5 - £7.5k (lump sum) = £30k by the time you hit 60. But then you start to lose £2.5k a year after that with a break even point around 72.
    So waiting until you are 60 would be similar to paying in £30k to give yourself a higher pension in the future. Or you could draw the pension at anytime inbetween 55-60, but not after 60 as you only lose money then without any gain.
    This all ignores tax so you would have to pay an IFA if you want advice on your options.

     
  7. My sister-in-law would be interested to know this, as she is 56. Has anyone any idea just how much it would cost to 'buy' say four extra years, or give the TP or whatever, so it amounts to the same thing. She has £25 in savings, which she could put towards this. She has tried asking TP, but you get different answers depnding on to whom you speak.
     
  8. It would not be cost effective for your sister in law, she would be better looking for a savings rate.
     

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