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Hypothetical calculation

Discussion in 'Retirement' started by offordj, Mar 14, 2019.

  1. offordj

    offordj New commenter

    I have been teaching since September 1983 and recently requested my revised salary details from Teachers Pensions. My best three years were from 01/02/09 to 31/01/12, but were then dropping off. In order to preserve this period, I have opted (from 1st March 2019), with the intention of opting back in on 1/04/19.

    I believe that this creates a hypothetical calculation scenario, where my pension would be based on one of three scenarios.
    • My final salary
    • The best three years out of the last 10
    • The best three years up until the one month break
    Obviously the third scenario is going to be the best outcome for me, but I'm just wondering if my thought process is correct.
     
  2. diddydave

    diddydave Occasional commenter

    I don't think so, the pensions website is down until Monday so cannot confirm but I believe if you rejoin within 5 years you are treated as having never left. I think the only way to fix the 10-years is to opt-out (and make sure you stay opted out - beware auto re-enrolment), stop working or actually take the pension.
     
  3. applecrumblebumble

    applecrumblebumble Lead commenter

    That’s my understanding as well, you have to leave for 5 years to be considered as a deferred member of final salary (old) scheme.
     
  4. binaryhex

    binaryhex Lead commenter

    Indeed, you have to have left for 5 years to get moved into CA, otherwise you are enrolled back on the final salary scheme automatically without a choice - phone and check with the TP scheme though as they do change the rules sometimes. It's going to be a fine calculation, but I suspect opting out will still be the best option. Started 1983? You must be v close to retirement? Opt out and start a low cost SIPP until you retire. This will give you some control over whatever you save when you finally go, which can be handy. Unless you post some figures, you'll probably need some professional advice for this one but don't wait - it can cost you a lot of money as your best years are (from memory) the best ones to have your pension based on!
     
  5. offordj

    offordj New commenter

    Thanks for the responses. I will contact TP next week to clarify things.
    Having read up on a wide variety of threads and having not encountered anything similar, it does sound too good/straight forward to be true.
    I'm currently 58 and for the first time ever (since September) down to 4 days (0.8), but still keeping my position as H.O.D.
    My thinking is to do one more year (possibly at 0.6) and still keep the H.O.D. The school seem happy with this as they can introduce somebody else to the role for the remaining 0.4.

    My revised salary is pretty good from 01/03/09 to 31/08/10, but then plummets by over 4K during the remaining months of the 3 year period, hence the need to get out.
    A low cost SIPP does sound a good idea. I guess I just need to avoid dying for the remainder of my teaching career!
     
  6. diddydave

    diddydave Occasional commenter

    You're really (really) going to need proper advice from someone who knows the complete ins and outs of the scheme.

    What would be concerning me is that not only are your best years dropping off the scale but you are not adding whole extra years to your service. This year for example will only be 0.8 of a year and then only 0.6 (possibly) the next year BUT the best ten years is calendar not working years.

    You could look at phased retirement but you take the actuarial reduction.

    Personally I would run the numbers through a spreadsheet but I think you may well want to consider opting out now and sticking the money into a private pension instead.
     
  7. binaryhex

    binaryhex Lead commenter

    If you are 58 and on a reduced timetable and salary, then I really wouldn’t bother with a SIPP. Withdraw from the current scheme to preserve the best years in your final salary pension (and do this very quickly as every day you delay will see your final salary pension drop!!!). Then just save any spare cash and shove it in an ISA or put in under the mattress. The extra hassle isn't worth investing via SIPPs / shares, which are really for medium to long terms, not 18 months, and you'll have total flexibility with your money. Unless you get very lucky, you are likely to lose money using a SIPP as costs will not have been recovered in 18 months.
     
  8. phatsals

    phatsals Occasional commenter

    I would open a SIPP. Your contributions attract tax relief of at least 20% even if you don't invest in anything.

    I did exactly as you are planning, I opted out of the scheme when I saw the figures drop like a stone, opened a SIPP with what I would have paid in and 6 months later took my pension. I did start another contract and contributed to the new Career Average scheme for a while. The SIPP is still sitting there for whenever I want it, using the drawdown facility.
     
  9. letap

    letap Occasional commenter

    A work colleague of mine, who is in the same boat as OP, has been advised by TPS - on the phone and by writing that option 3 is possible.
    Conversely, there is no official TPS documentation that suggests option 3 is possible and a pension advisor has told me option 3 is not possible either.
     
  10. diddydave

    diddydave Occasional commenter

  11. offordj

    offordj New commenter

    Thanks for the continued advice. I opted out (and received written confirmation that I had done so) on 1st March.
    I too have done the calculations diddydave and my pension IS definitely going down - hence the decision to be out.
    Thanks letap for your confirmation that somebody else has at least heard of the 'hypothetical calculation' scenario. I had the Wesleyian guy round in early February and I'm pretty sure that is what he said as well.
    As mentioned earlier, my concern is that very few other people seem to be aware (if indeed it does exist), of this option. I have googled it and nothing comes up. Clearly the worst case scenario would be for me to naively opt back in on 1st April, with the mistaken belief that my pension is frozen after the one month break, whereas in reality it is diminishing on a month by month basis.
    I will let you know what TP say when I speak to them on Monday
     
  12. scotty_dog

    scotty_dog New commenter

    I am in a similar position but a bit younger (53). I contacted TPS in Feb 2018 to ask about when I should opt out to preserve my best 3 years in 10 because I have had x6 years as a head and am now a class teacher. I got no reply to that email but phoned in Feb 2019 to follow up on my query and was told, for the 1st time, about the "hypothetical scenario". This WILL be on offer because I had a break in paying pension when I left headship in 2011 and became a supply teacher for a short while. There is info on this on TPS in a pdf but you do have to hunt it down. I have now had a written confirmation of this and I will not need to opt out again to be eligible.
     
  13. offordj

    offordj New commenter

    I spoke to TPS this morning and the hypothetical calculation is all good. As I am not paying into the pension scheme for this month, it will be regarded as a break in service. It is therefore absolutely fine for me to opt back in as of 1st April and the best three consecutive years (01/03/09 to 28/02/12) will in fact be preserved. This third option, due to inflation, is almost certainly going to be my best one.
    My only regret is that I didn't pick up on this about 12 months ago as my good months have been disappearing off the end of the proverbial conveyor belt for quite a while.
     
  14. diddydave

    diddydave Occasional commenter

    Make sure you get it in writing as no-one has been able to find this in any 'official' documentation from what I am aware of.
     
  15. offordj

    offordj New commenter

    That's sound advice. Otherwise it could be potentially a very expensive misunderstanding!
     

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