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DiddyDave

Discussion in 'Retirement' started by cornflake, May 18, 2020.

  1. cornflake

    cornflake Senior commenter

    Hi Diddydave

    I have a quick query and was hoping the expert could help please!

    I've left my school leadership post so now have the hypothetical calculation secure.
    My highest salary when leaving TPS was the last 365 days of service
    Am I right in thinking:

    1. If I rejoin within 5 years, the calculations include the 1.6% above inflation again for all values (but otherwise it is "frozen")
    2. If I take a job at a lower pay rate, unless I exceed the value of salary at the hypothetical break in the next 10 years, then none of that service would count in calculating the pension i.e. I would be better off putting those contributions into a SIPP or otherwise. Unless of course, that 1.6% uplift makes it worth contributing???

    Not found a job yet, but just factoring in "future opt out" as a way of seeing what the take-home might be in between applications...

    Thanks
    C.

    PS no dependants, so the death in service benefits of TPS don't mean much to me personally!
     
  2. diddydave

    diddydave Established commenter

    Most of this will depend on what happens in the conversion of the Career Average back to the Final Salary scheme once the Tribunal rules and what dates it will apply from.

    Point 1.
    My best guess is that, for all of your service up to your break , you will be able to choose to have that treated as Final Salary - I imagine this will be the most advantageous choice but the devil will be in the detail once it is published.

    Bearing that in mind then the 1.6% 'boost' to the Career Average portion is probably not going to be a factor in your calculations. However, yes - if you rejoin before 5 years have passed then the Career Average amount will be increased by 1.6% for EACH of the years that have passed - even though you have not been back in the scheme for those years. It also maintains the final salary link for working out the final salary scheme.

    The career average amount IS increased each year by inflation, so not quite 'frozen', if you are no longer in the scheme.

    So, in summary, it is likely that you will have NO Career Average amount to consider once the tribunal rules as your service that was under that scheme is likely to be better treated as being in the final salary scheme.

    Point 2
    This again depends on what is going to happen with respect to the different schemes and how they will be corrected. The Hypothetical Calculation only applies to the Final Salary scheme so there are questions as yet unanswerable as to when that scheme ends. I would suggest that the latest date that the Final Salary scheme will be available will be 2022 so if you go back into the scheme after that it is likely that your service will be in the Career Average scheme. How they will work out your overall pension when both are to be combined will need to be looked at. What would be ideal for you would for you to be able to treat your service up to the break as Final Salary and then any future service to be in the Career Average scheme so that the latter can be added to your Hypothetical Pension rather than 'lose' some service.

    So in summary, if your next job involves you going back into the Final Salary scheme that is probably not going to be worth it. If you go back and into the Career Average scheme that is probably worth doing - but with the caveat that in the immediate future, i.e. up to 2022, the CA scheme could be changed by the tribunal back to the FS scheme which would make it worthless if that service didn't lift you above the Hyp. Calc.
     
  3. Lara mfl 05

    Lara mfl 05 Star commenter

    Glad Diidydave was able to give some info, but just wanted to post to say I'm sorry you've had to leave your post. :( I've been wondering for a while what happened to you.
     
    Dorsetdreams likes this.
  4. meister

    meister New commenter

    DiddyDave for Chancellor!! :)
     
    cornflake likes this.
  5. cornflake

    cornflake Senior commenter

    Thanks DD. So unless I get a new post at the same or better salary point, I may as well stay out of the TPS until 2022, on balance. Unless there is some kind of announcement about CARE/Final. I really appreciate your lengthy response and will digest this a bit more this evening!
    Lara - thank you too for your comment. It’s been a bit of a journey to say the least. I’m very surprised to find myself keen to get back in post, but also beginning to think that might prove to be impossible as I think most GBs are risk adverse and don’t want to delve too deeply into context. So getting shortlisted is a challenge.... especially right now :(
     
    Lara mfl 05 likes this.
  6. Lara mfl 05

    Lara mfl 05 Star commenter

    On the other hand I suspect a fair few Heads who may have been considering early retirement soon, may push those plans forward after trying to cope with all the challenges of running schools during the pandemic.
     
  7. diddydave

    diddydave Established commenter

    Not necessarily. If you have 10+ years in your plans before taking retirement there is a good chance that even a lower paid post will, when the final salary is adjusted for inflation, overtake the salary you had at the break. Trouble is that there's no way to go back into the scheme retrospectively if you stay opted out so you cannot wait to see what will happen in the next few months/couple of years.

    For example. If you finished on £60k but take a post this year at £45k that seems like a lot to make up but the £60k 'final salary at the break' figure NEVER increases whereas the £45k will be uprated by inflation every year..so in 10 years time it will have increased by 10 lots of inflation. If inflation was to be 3% then that would have it reach £60k at the end of 10 years. So you have to judge whether inflation will rise to that level or beyond and what salary you would be going back in on. At the moment 3% looks unlikely - but I have no idea what will happen, will the debt the country has incurred through this period cause it to plummet or sky-rocket. Given that at most I'd get an extra 2 years, from my foresight (do not rely on my fortune-telling skills), I'd probably stay opted-out and look to go back in once the changeover date to the Career Average has been sorted out for everyone.
     
  8. cornflake

    cornflake Senior commenter

    I think you are right. I was hoping to take early retirement in 7 years time, immediately before the increase to ARB age claiming! Of course depending on how quickly I can get another job, that is now in doubt as I have to spend my savings now.

    Lara - I gather lots of HTs who were planning on going in August are now staying on til December... so there are only a smattering of jobs now. Many I have applied to have delayed shortlisting too... so I’m a bit stuck.
     
    Lara mfl 05 likes this.
  9. Sundaytrekker

    Sundaytrekker Star commenter

    Best wishes with any applications cornflake. I hope something comes your way soon.
     
    cornflake and Lara mfl 05 like this.
  10. Lara mfl 05

    Lara mfl 05 Star commenter

    Good for them for 'stepping up', but not so good for you.
     
  11. cornflake

    cornflake Senior commenter

    Yes - great for children, staff, communities :)
    A door will open somewhere ... hopefully!!
     
    Lara mfl 05 likes this.

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