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Declining value of '80th scheme' any advice?

Discussion in 'Retirement' started by canddmum, May 31, 2019.

  1. canddmum

    canddmum New commenter

    Hi - I am wondering if there is anyone with any words of wisdom for me?

    I am planning on taking early retirement in 5 years and have been trying to work out what my pension is likely to be - just seems to be a mathematical nightmare.

    I am a transitional member, and by far the bulk of my pension is in the old '80th scheme'. What is concerning me is that when I look back through my online statements the value of this has fallen from last year, and I am sure will keep falling for the next 5 years - both the annual pension and the lump sum. It is only by £50 on the annual and £200 off the lump sum or so from last year, but I think this is going to be an ongoing downward trend. This is because of the uplift for inflation I believe - my best 3 years in 10 best years are gradually slipping off the calculation (if that makes sense).

    I was wondering is if is possible or advisable to opt out the TP now in order to protect the best 3 years in 10 at the highest possible rate. I am not all all optimistic of any pay rise in my remaining 5 years, and in fact I may leave teaching during that time anyway. The benefits I am building up under the new scheme do not seem to be accruing all that quickly, and besides which if I do take my pension at 55 I will lose pretty much half of this portion anyway!

    Does anyone have any insight into the pitfalls or advantages of opting out - I realise that the death in service benefits would be lost, but is there any other problem that I have missed. I don't want to make a huge mistake and regret it and I know that advice generally is that even in the new format the TPS is one of the best pensions out there. Are I panicing over nothing or taking too big a risk for the sake of not a great annual loss in my pension years?
    Prim likes this.
  2. PeterQuint

    PeterQuint Lead commenter

  3. diddydave

    diddydave Established commenter

    I suggest you get your list of salaries from the last 10 years, with their revaluations into today's value, from TPS so you can see exactly what is happening to your own figures. (Use the secure message through the TPS website to request this - if you put the 'subject' that you can choose as 'social media' rather than any other I am told you get a faster response).

    If, like most, you have not had any stunning pay rises in the last 10 years you will be able to get a rough idea by averaging the 10th, 9th and 8th year ago and compare it to 9, 8, 7 years ago and so on through to 5, 4 and 3 years ago (as this will most likely be the one that will be used if you go in 5 years time.) The calculation for this portion of the pension is exactly the same as the number of years service used to multiply by has been fixed to the point at which transition members were moved to the career average scheme.

    I'd also caution that there is still some uncertainty about how the pension for transition members is going to be worked out due to the legal challenge that was won against the government.

    Opting out may freeze the best 3-in-10 but it also removes the 1.6% bonus that is applied each year to the career average sum (as well as no longer contributing the 1/57th to that sum).

    Be wary of comparing benefit statements from different years because each year you get the inflation increase and this will mask some of the drop in the value of the 80ths scheme.
    Prim likes this.
  4. Prim

    Prim Occasional commenter

    I'm in the same position and considered freezing now but it makes no sense to do this. I've considered finishing in 5 years but building enough savings to keep me going until I'm 60 and if I don't need to draw my pension until 60 I'll leave it there and then let the CARE one accumulate until 67 (If I make it that far). If I don't have enough to live off without scrimping I'll cash my pension in. Still a very fortunate position to be in.
  5. Bedlam3

    Bedlam3 Star commenter

    I might not be correct but my understanding is that you have to take the CARE benefits at the same time as your final salary one.
  6. paulstevenjones

    paulstevenjones New commenter

    No I don’t think that is true. You can take one at 60 and the other at 67, will probably be 68 within 10 years.
    strawbs and Prim like this.
  7. diddydave

    diddydave Established commenter

    strawbs and Prim like this.
  8. tonyuk

    tonyuk Occasional commenter

    I am in the same position so if I take the one at 60 then I just claim that on my 60th Birthday and continue teaching. How does that effect my salary of reference?
  9. 50sman

    50sman Lead commenter

    If you claim pension after the age of 60 you cannot earn more than your salary of reference so you need to be sure that your pension and your salary combined do not exceed this figure
    Startedin82 likes this.
  10. border_walker

    border_walker Lead commenter

    salary from teaching only, other salary - no limit.
    Startedin82 and Prim like this.
  11. TheFonze

    TheFonze New commenter

    Might be worth speaking to your union and asking for advice from one of their pension specialists. Or try someone like Wesleyan, they run retirement planning courses that are free to attend and are approved by the major teaching unions. Good luck with retirement - I retired a few years ago and I am enjoying the life!
  12. Bedlam3

    Bedlam3 Star commenter

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