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Final salary pension

Discussion in 'Welcome lounge and forum help' started by mikebez1, May 4, 2019.

  1. mikebez1

    mikebez1 New commenter

    Hi. I am unsure of how my pensions work. I’m 54 and my final salary pension finished in terms of contribution a few years ago and now I’m on the teachers new pension career average. Does my final salary effect my final salary pension. Ie. Is it the best three years in the last ten from when I retire or from when the final salary pension finished two years ago My salary has dropped in the last few years significantly as I resigned my SLT commitments. Does this mean I will have to opt out at a certain time in the next couple of years to ensure i optimise my final salary pension.
     
  2. HolyMahogany

    HolyMahogany Occasional commenter

    cannot give you specific advice - My wife has gone through a similar situation and you are right to look at this issue now - The best 3 in last 10 can make a significant difference to your income and you do not want to lose out on this. problem was different advice from different sources.
    HR said best 3 was protected / financial adviser said it was not protected / TPA will only answer very specific questions, they will not volunteer additional info, and we could not get a clear answer to a variety of questions that we felt confident about.
    followed FA's advice - Wife has stopped working and informed TPA that she has stopped so that her final salary pension is frozen. Will restart work and then just continue with other parts of pension.
    You only need to take a beak of one day - but check this with school and TPA.
    Also were told by TPA that if she takes ARR she has to take this for all parts of her pension and cannot split this. This impacts heavily on the other parts of pension that start at 65 and 67. TPA good on organising my pension but very poor on giving info about some specific issues.
     
  3. diddydave

    diddydave Occasional commenter

    Two things before I get into it.
    1) Get proper financial advice from someone who can go into your exact details and numbers - everyone's experience and needs are different and you need an expert who can go through yours. I'm no expert but I am a similar age and so have the same kind of mix of the two schemes - so I'll go through some of it later...but don't take it as gospel!
    2) You might want to post in the 'retirement' forum to get more focused opinions.

    Both Pensions - you can see the figures in the benefits statements available on the teachers pensions (TPS) website but I will go through what I think (get your own expert to check though)

    FINAL SALARY
    This salary is your best salary either from the last 12 months (unlikely from what you have said), or the best 3 in the last 10 years. This is from the date you pay your last contribution into the scheme. So if you are paid for this May it will be from 31 May 2019 backwards 10 years to 1 June 2009. If you were to opt out at the end of May then this period of time remains fixed and it will be used when you come to take your pension.

    Your pay from those years is 'revalued' into today's money by adding on inflation. You can ask TPS for your personal revaluation (use the message option in their website). By looking down the list of figures you can see if there is a date where it drops significantly, this will be a key date for you to look at with regard to when, or IF, you want to opt out.
    If you want to get a rough idea I did do a spreadsheet where you can put in your salaries from the time: https://docs.google.com/spreadsheets/d/10x-lKLuc0PXi9C5JftanxmFVVh0PxNYKYEa70xljn38/edit?usp=sharing (make a copy of this sheet to use for yourself if you like)

    The number of years for the final salary scheme is fixed to the date when we were all moved onto the career average salary (though this may change due to the challenge made by the firefighters and judges over the legality of the scheme). Because of this you will see the value of the final salary pension dropping if your revalued salaries are dropping as the extra service is not (currently) adding anything to that portion of the pension.

    CAREER AVERAGE
    Each year your annual pension is increased by 1/57th (you can increase this through the flexibility options offered in the scheme) - so if your salary is £57,000 this year then your pension will go up by £1000. The amounts put in in previous years is increased by inflation...and the big bonus of this scheme if you are still paying into it...another 1.6%.

    EARLY RETIREMENT
    If you take the pension before 60 then you have to take both the final salary and career average portions at the same time and they are reduced depending on how old you are. E.g. Taking it at 55 means your final salary pension will be 83.3% of that you would receive at 60...but as you getting it for 5 years longer it means you wouldn't notice a difference until you were into your 80s. For the career average taking it at 55 would mean you get 54.6% of what you would at 67 (or whatever is your Pension age for this scheme)...but again as you are getting this for 12 years longer it also doesn't mean you are worse off until much later in life.

    If you leave the final salary until you are 60 then you do not have to also take the career average at the same time.

    As you can see you probably do need someone who is an expert who can go through these figures specifically for you with you as although the numbers are fairly simple to calculate there are a lot of twists...and of course the whole scheme's split between the two schemes is currently under review and won't be resolved until the government decide whether to appeal the judgement regarding the scheme and/or present their alternatives.
     
  4. drvs

    drvs Star commenter

    simonCOAL likes this.
  5. simonCOAL

    simonCOAL Occasional commenter

    This has to be the route to follow.
    I’m looking into early retirement and I have found the TPS very good. It’s their scheme, after all.
    Make them your first point of reference, get the facts and go from there.
     
  6. blazer

    blazer Star commenter

    Get in touch with the Wesleyan and ask to go on one of their free seminars. If you are an NASUWT member then there should be contact info in union literature or on the website. If you are NUT/ATL (or whatever they call themselves these days) I think Aviva does the same service but Wesleyan will also take you.
     
  7. diddydave

    diddydave Occasional commenter

    Absolutely agree, find an expert...however by looking through the posts on the retirement section and getting a handle on how the numbers are worked out you will be in a better position to ask the relevant questions.

    TPS are not good at providing you with answers to "What if..." type questions.

    Our Wesleyan rep was very good, it was a free consultation (and then a few more yearly sessions - also for free) and she went through the figures and how to get to them very thoroughly but I have heard that it can depend on the experience of the rep.
     
    simonCOAL likes this.
  8. simonCOAL

    simonCOAL Occasional commenter

    I tend to agree, but that’s for us to figure out using our particular context.

    TPS only claim to give you facts as they are. I’ve also heard Wesleyan are pretty good, so useful advice, diddy
     
  9. PeterQuint

    PeterQuint Lead commenter

    The simple and clear answer to the OP is that our last 10 years are your last 10 years, irrespective of whether you were/are paying into your final salary or average salary pension.

    You don't need independent financial advice for that, just look at you benefit statement.

    Taking mine as an example, I was in Final Salary from when I started (a few decades ago) up to Feb. 2016, then Average Salary since. My best 3 years are listed as May 2009 to May 2012. Every month that moves one month forward, so last month it was April 2009 to April 2012, and the month before it was March 2009 to March 2012.

    If this pension was only based on the best 3 from the last 10 from when I was in the Final Salary pension, it wouldn't be doing this. If March 2009 to March 2012 was better than May 2009 to May 2012, and the former was <10 years of me leaving the Final Salary pension (which it is), then March 2009 to March 2012 would still be showing as my best 3 (which it isn't).

    And everyone who discusses this in the retirement forums is seeing exactly the same thing.

    Two simple questions: when were your best 3 years as listed on your TPS benefit statement, and when did you lose your TLR?

    Finally, I agree with all of the above comments - get yourself to the retirement forums.

    Best wishes.
     
  10. mikebez1

    mikebez1 New commenter

    Hi that’s much appreciated. I will go this. On a slight different note. Could I take my pension at 55 Nd continue to work in the same job. ????
     

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