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Left teaching early but when to claim pension?

Discussion in 'Retirement' started by Compassman, Apr 18, 2019.

  1. Compassman

    Compassman Star commenter

    I left teaching in October 2015 after 30 years in the profession aged 52.

    Currently working in another non-teaching job (paying as well as UPS3) but thoughts are now turning to perhaps starting to wind things down, perhaps going 0.6 in my current job and claiming my teachers pension and/or the Prudential AVCs.

    When I left I was UPS3 (although additionally had been on a TLR for many years up until July 2014 (£2000 ish extra)

    Therefore a few questions to those more knowledgeable than myself....

    1. As I am still effectively on the old scheme the best last 3 years in 10 applies (I think). Therefore, assuming that my TLR years count then the years 2011/12 to 2013/14 will be my 'best' years? Therefore, is it best to claim prior to 2021 or still wait until 60 when the pension is not actuarially reduced (see below)?

    2. If I claim in 2021 (I will be 58 then) then is it right that the pension in reduced by 8% from the 'at 60' level (4% per year)

    3. Is it better to claim a bigger lump sum and smaller pension? That might work better for tax purposes if I am still working 0.6 in my current job.

    I know that dealing with specifics is the job of Teachers Pensions but wondered if anyone had any thoughts on this?
     
  2. diddydave

    diddydave Occasional commenter

    I'm no expert and I recommend you get proper advice, but having said that this is what I have found for my wife who career sounds very similar, worked 30 years, stopped in 2017, now 55.

    You can do the numbers quite easily yourself as, I think, you are entirely in the final salary scheme. Your best 3 year in 10 salary is on the TPS site, look at the current benefit statement and then the section below that has the details "Summary of Benefits".

    Don't forget that all of your salaries are 'revalued', so your 10 years will be October 2005 to October 2015 and are likely to be 2005-2007. (But you can see exactly which are the best 3 by looking at your benefit statement).

    From my calculations we've worked out that if my wife takes her benefits at 55 she will be better off up until the age of 83 than if she waits to take them at 60. But that is because she has no other earnings so the tax allowance plays a big part.

    Possible calculations will be (using the AAB reduction factors):
    Aged 55: Salary x 30 / 80 x 0.833
    Aged 56: Salary x 30 / 80 x 0.863
    Aged 58: Salary x 30 / 80 x 0.928
    Aged 60: Salary x 30 / 80

    To work out how many years we did this:
    (Aged 55 Salary) times 5 years (money paid by the time she's 60 - we called this 'banked money')
    Work out the difference in the aged 55 to aged 60 salaries.
    Take 3 times the difference off the 'banked money' amount (as you get 3 times the salary as a lump sum)
    Divide the figure above by the difference which tells you how many years after 60 it takes to get to the same total.

    We did also factor in tax but as you are still working that's going to be a little more complicated for you.

    With regards to taking a larger lump sum, we decided not to as we wanted the largest amount we could to be index-linked and as we have no mortgages or other investments to use it on so it would, quite quickly, be eroded by inflation over time.

    I did make a spreadsheet that you may find useful, please feel free to make a copy and use with your own figures. One note though, it does the calculation slightly differently to the TPS as they work out your pension to the date of leaving (in your case Oct 2015) and then increase it by inflation, my sheet works out your pension to March 2019 so already includes inflation. Mathematically they should be the same but don't rely on it!

    https://docs.google.com/spreadsheets/d/10x-lKLuc0PXi9C5JftanxmFVVh0PxNYKYEa70xljn38/edit?usp=sharing
     
    Mrsmumbles and Lara mfl 05 like this.
  3. Brianthedog

    Brianthedog Occasional commenter

    As you no longer pay into TPs your 10 years go back from the date you stopped, whenever you choose to take your pension. Therefore you are not constrained by the best 3 in 10 dropping off.
    Only you can decide if you can afford to take your pension early.
    Only you can decide about having a lower pension v higher lump sum. If you register on the TPS site, you can play around with the calculators to give you this information.
     
    Lara mfl 05 likes this.
  4. binaryhex

    binaryhex Lead commenter

    Tax and savings will play a big part in any calculations. All income over £12.5k is taxed and savings rates are pitiful. And your best revalued years are likely to be 2009-2011 from memory (check this with TPS), and they will be revalued at rates far better than any savings accounts. When you get your pension, it’s index linked so protected as well, and the 4% a year you lose compared to taking a pension at 60 is a lot of money every year ‘extra’.

    If you have enough savings, and if you have no known reason to think you may die in the next 16 years, I would tend to recommend that you use your current earnings plus savings first. Only when you actually need your pension should you take it before 60 if you can use savings earning next to nothing first.

    As for the lump sump debate, only you can decide. If you are going to take a lump sum, only to bank it with no purpose, then don’t increase the lump sum. If you need a bigger lump sum for some reason, like paying off expensive credit cards or helping a child with buying a property, and the pension you have left is enough, then you have some thinking to do.
     
  5. Compassman

    Compassman Star commenter

    Many thanks for the replies. I have some pondering to do!
     

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