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Final Salary Calculation

Discussion in 'Retirement' started by Dorsetdreams, Sep 11, 2018.

  1. Dorsetdreams

    Dorsetdreams Occasional commenter

    We have had considerable discussion on this forum concerning the 'final salary' calculation and the effect of the loss of the good RPI/CPI years from the 'best 3 years in 10' part of the calculation.

    I'm a transitioned member, with 29 years in the final salary and a couple in the career average scheme, on a static salary over the last decade. I've been downloading my TP statement regularly to keep an eye on things.

    For the first time, my calculated 'final salary' has dropped. It's fallen by just over £200, between last July and now.

    Looking at the historical RPI/CPI figures (below), I'm guessing that the 5% year is starting to fall out of the calculation. Part of my thinking is that it only takes 9 adjustments to account for 10 years of inflation. But if I am wrong, and it is the 3.9% year going, then there is much worse to come over the next year.

    2018/2019 = 3.0% Applied in April 2018 (to 2016-17 salary??)
    2017/2018 = 1.0%
    2016/2017 = 0.0%
    2015/2016 = 1.2%
    2014/2015 = 2.7%
    2013/2014 = 2.2%
    2012/2013 = 5.2%
    2011/2012 = 3.1%
    2010/2011 = 0.0%
    2009/2010 = 5.0% Applied April 2009 (to 08-09 salary??)
    2008/2009 = 3.9%

    It isn't wise to extrapolate from such narrow data, but it is a little worrying to see that half the addition to my Career Average pension over the last two months has been wiped out by the fall in the Final Salary.

    Does anyone else monitor their TP account?
    Have you noticed a fall?
  2. heldon

    heldon Occasional commenter

    I believe the 5% drops out from next April 2019
  3. Startedin82

    Startedin82 Established commenter

    I thought it was the September of any given year that it dropped out?
  4. Dorsetdreams

    Dorsetdreams Occasional commenter

    I'm starting to suspect that we've been over-simplifying somewhat, and that the precise calculation is done by CPI adjusting historical pay from every single month using these tables (Annex B tab).
    richest1 likes this.
  5. heldon

    heldon Occasional commenter

    I believe the cpi index figure is applied the following april
  6. heldon

    heldon Occasional commenter

    Meant to say Sept cpi figure is applied the following April. That is what the Scottish teachers pension people have told me.
  7. cjfish

    cjfish New commenter

  8. cjfish

    cjfish New commenter

    I have been advised that my pension will go down because of the effect of inflation.
    I was advised to opt out and then opt back in again by TP advisor. Am very confused by whole thing - have FA looking at it
  9. richest1

    richest1 Occasional commenter


    So what does the table mean? Multiply what by what?

    My pension started September 1991 and I leave 31st August this year.

  10. diddydave

    diddydave Established commenter

    Your last ten years salaries are multiplied by the CPI rate to get how much they are worth in 'todays money', The best 3 years of those are used to work out the salary that will be used to calculate your pension.

    The figures are compounded, so if you have two years CPI of 2% then your increase is slightly more than 4%. There are easier tables that let you just multiply each year by a single figure. I made a spreadsheet to do this at: https://docs.google.com/spreadsheets/d/10x-lKLuc0PXi9C5JftanxmFVVh0PxNYKYEa70xljn38/edit?usp=sharing
    But bare in mind that it is not guaranteed to be completely accurate - you can save a copy and use your own figures to give you a rough idea. You only need your pay from the last 10 years (so from 1/09/2009 to 31/08/2019)
    richest1 likes this.
  11. richest1

    richest1 Occasional commenter

    That's great work. Many thanks for your help.
  12. diddydave

    diddydave Established commenter

    If you stick in your salaries from 10/04/2009 - 09/04/2019 and adjust your service length to match you can see if there are any benefits to opting out of the pension for the last few months...due to the inflationary effect some people have seen their pensions go down by staying in (BUT...don't rely on my spreadsheet to help you make this decision, you will need to get proper expert advice on that!)
    richest1 likes this.
  13. limiti

    limiti New commenter

    I worked through all of the figures withTP, 2009 is my (and probably most people’s best year) . By freezing my pension now, I will get exactly the same in the summer of 2020,as I would if I kept on paying in. I also get the extra in my pay packet each month. The advisor at TP said teachers who had worked this out were all doing it
  14. macshui

    macshui New commenter

    Thanks so much for this.
    I'm retiring in August, and did my calculations with with your spreadsheet.
    I received my final figures yesterday and was only £10 out.
  15. diddydave

    diddydave Established commenter

    Excellent and good luck with your retirement.

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