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Losing my best 3 in 10

Discussion in 'Retirement' started by Iwanttoretire, Feb 26, 2020.

  1. Iwanttoretire

    Iwanttoretire New commenter

    Am new to this so please be gentle!
    I am sure there is a thread which answers my question but I have a feeling time may be short as you will see below.
    I will be 55 in June and have been teaching for 32 years and 60 days full time with no breaks I am trying to get forecasts for how much in total I would receive per year for my pension if I retire at 55,56,57,58,59,60and have tried using the TPcalculator but am not sure if it is just working out the final salary part of my pension and omitting the average salary part as I am a transitional member. There is a further complication ! From Sept 1999 to Sept 2012 I was Head of Department and paid a higher salary and presumably paid more contributions.. Since then I have returned to being an MPG teacher I have read that the final scheme takes your best 3 years in the last 10 into account and so does this mean I will lose out in some way on my final salary pension or my average (or both )if I continue to work beyond September 2022 Ie 10 years after I stopped getting paid at a higher salary? Any help would be very much appreciated as I am confused !
    I have contacted TP with the above and am awaiting a reply
  2. catslovelycats

    catslovelycats New commenter

    Yes it does mean that. Contact TPS and ask for a consultation with an advisor. They come to you for free and go through all the options, pitfalls etc - one of which is your higher salary dropping out of the 10 year window. I’ve a similar dilemma.
    Iwanttoretire likes this.
  3. diddydave

    diddydave Established commenter

    I am not an adviser or expert but have looked into this in some depth, and I think you have probably just caught it before it gets really bad. My gut feeling is that you should look to opt out pretty soon for at least 1 month.

    Opting out TODAY could easily be the best option.

    You are losing out already! And no, it's not beyond September 2022 where you *start* to lose out - that's the point by which it will be too late as ALL of your higher salaries will have gone from the last 10 year calculation.

    You start to lose out when the three years of your higher salary start to be replaced by years from the lower salary. So take the 3 years *back* from when you stepped down. That is September 2009 to September 2012. You have already *lost* September 2009 to February 2010.

    I've posted extensively here and my 'notes' are here: https://edividers.co.uk/contemplating-retirement-my-path-and-other-notes

    You can get some protection through opting out as it creates an extra calculation (the Hypothetical Calculation) that fixes the best 3-in-10 salary.

    To get a rough idea of how badly it is affecting you look at the salaries on the TPS website under your benefit statement where they list the last 10 year figures...there is a column that contains "Method B", it will be right at the bottom (Feb 2010-Feb 2013). Every month that goes by with you still in the scheme replaces a month from the very bottom with one from the top, or just above, of the method B labelled salaries.

    If you would like me to go through it in more detail with you please start a conversation with me.
    Iwanttoretire likes this.
  4. Iwanttoretire

    Iwanttoretire New commenter

    Thanks for this didn’t realise you could get an adviser to visit from TP.
    Am I opting out of just my final scheme or the final and the average one?
    Will ring TP this afternoon,must get to work now!
    Will read other threads when I get home!
  5. Morninglover

    Morninglover Lead commenter

    I agree with DiddyDave.

    For what's worth, my 'best 3 in last 10' ended in 2004, and I retired in 2013 at 56 (after just over 30 years of teaching) partly to make sure I didn't lose out on them entirely (I couldn't go before then for other reasons). Don't miss out, I'd suggest!

    I also took the largest lump sum I was able to and so have a pretty small pension (net £1300 per month, plus a couple of small AVCs) BUT retiring early was the best thing I ever did, and I haven't worked a day since.
    lindenlea and Iwanttoretire like this.
  6. diddydave

    diddydave Established commenter

    Afraid you cannot split them.

    Also with the court case having ruled against the way in which the changes were implemented there is a very good chance that you will be treated as being only in the final salary scheme - though there is a promise from the government that if the mix of scheme would have been better for you that you will get the best. The problem with that is that they haven't been told how they will work any of that out yet.

    Tomorrow of course is the end of the month and opting in and out is taken from the end of the month in which you apply - that may be too much of a rush to get your head around and doesn't give you any time to check your numbers carefully.

    Where I've been through the numbers with other people one thing we do look at is what you are risking by opting out for a month compared to what you might gain.

    If you opt out for just one month you;
    1) Lose the death in service protection (3 times your salary)
    2) Lose the contribution to the pension scheme. In the career average scheme this equates to about a 1/684th of your annual salary - so if you are on £40,000 then your career average pension misses out on £59.

    You gain
    1) An unknown amount in your final salary scheme, but with your service of 32 years and presuming a salary of around £50,000 back on 2010 if that salary were to drop by 10% the two calculations are:
    32/80 * 50,000 = £20,000
    compared to
    32/80 * 45,000 + 30 days (30/365)/80 * 45,000 = £18,000 + £46.23
    2) Not paying a pension contribution of about 10% for the month (£45,000 /12) *10% = £375 (~£300 after tax)

    So at the risk of losing an annual amount of £59 from your career average pension your final salary one doesn't lose ~£2,000 !
    Iwanttoretire likes this.
  7. Iwanttoretire

    Iwanttoretire New commenter

    Thanks all
    At work but class revising!!
    Am still slightly confused,do I opt out for just 1 month or for as long as I continue to teach
    Also is there anyway I can backdate opting out to lastSept when I should have done this.
    Unless I have missed something from TPI feel very badly let down by them for not being warned about this.
    It was only my wife pestering me about this that got me to here,I suppose it's my own fault partly
  8. diddydave

    diddydave Established commenter

    There are several option which is why it is important to go through the figures and your circumstances.

    Trouble is there are still some significant 'unknowns' what with the court case etc. However my personal advice for anyone whose best 3-in-10 is dropping is to take a month out immediately and evaluate the position because, I believe (and remind you again that I am only a maths teacher not a financial expert), that gives a better chance of a higher pension.

    TP will only tell people HOW the scheme works, they will not ADVISE - that is all tied up with the 'mis-selling' scandals where they could become liable so yes they are not alerting anyone to what may be happening - and to be fair there are just so many combinations it would take an army to check all of the ins and outs.

    You cannot backdate it unless you are within 3 months of joining or being automatically re-enrolled.

    Only by doing the maths on the numbers along with a few assumptions about what will happen with the reinstatement of people onto the final salary scheme will you be able to make an informed judgement.
    Iwanttoretire likes this.
  9. HRHHenry

    HRHHenry New commenter

    Hi, I am in a very similar position, (55 in August) I spotted a similar situation occuring with my best figures dropping out the other end. I (following advice from DiddyDave and research) opted out of TP for one month (Jan 1st - Jan 31st) then opted back in on Feb 1st. I went to the TP head office for a consultation last week and was greeted by a lovely adviser who said ' Well you've clearly got your head screwed on'. The process of opting in and opting out will effectively fix in place, as a third option, your best 3 in 10. It took a while and a bit of tooing and froing ?? but TP chat advise was great and HR in my county were extremely helpful and obliging. Good luck.
    lindenlea likes this.
  10. wayside34

    wayside34 New commenter

    I can tell you what happened to me if it helps , I am a retired teacher no an expert so please seek guidance from Teachers pension or a financial expert . I worked over 30 years in final salary teachers pension scheme. I took a severance in 2015, I became a deferred member.

    I did supply in 2018 was auto enrolled into final salary scheme as a protected member. I noticed my pension was deceasing on a monthly basis. I submitted my concerns in writing to teachers pension and received a written response with examples with normal calculations and hypothetical calculations , plus I also opted out .

    I ended up with a hypothetical pension at 60 which in my case was better than the normal calculation . Diddydave is correct teachers pension do not advise.I found to get written responses from teachers pension to be better than 'calling' .On a final note it would appear the further contributions( when on supply ) I made after taking my severance in 2015 were not included .
  11. Iwanttoretire

    Iwanttoretire New commenter

    Thanks Diddydave,
    Believe it or not I'm a Maths teacher as well but usually only between 9am and 4pm!
    Looks like that will have to change!
    I had heard about this court case-wasn't it something to do with the fire men taking the govt to court over their change in conditions.
    Are the teachers/unions/all public sector workers challenging as well?
  12. diddydave

    diddydave Established commenter

    This is one of the twists and turns that makes it different for everyone.

    IF (big IF for iwanttoretire ) your final salary when you finish is LOWER than that when you took the break then the extra service after the break isn't used in the calculation...in this case it is likely that opting back in is pointless as you are paying into the pension for no additional benefit (as I presume was the case for wayside34 )...trouble is that you need a bit of a crystal ball to be able to tell if that's likely, though we can have a good stab at it by looking at different models.

    For instance, remember that in these circumstances inflation is your friend. If at the month's break you have a salary figure that is 10% higher than you currently earn then if you have 5 years of inflation at 2% there's a good chance your final salary will have risen above it and all of the service gets counted.
  13. Iwanttoretire

    Iwanttoretire New commenter

    Let me see if I've got this right
    So if I opt out it is from both the final AND average schemes???
    If so I can see why you would only do it for a month and not forever as at the moment I am still contributing to the average scheme only and need to build that up ???
  14. Iwanttoretire

    Iwanttoretire New commenter

    Have just looked at Diddydaves excellent thread including his excellent powerpoint
    on opting out.
    If I am correct(???) you opt out for 1 month then opt back in .
    This freezes your final pension and TP will calculate your best 3 yrs in 10 up to the date you opted out,giving you benefit of any higher salary earnings .
    By then opting back in you continue contributing to the average scheme.
    However one possible drawback could be and I quote diddydave' the court case having ruled against the way in which the changes were implemented there is a very good chance that you will be treated as being only in the final salary scheme - though there is a promise from the government that if the mix of scheme would have been better for you that you will get the best. The problem with that is that they haven't been told how they will work any of that out yet.'
    Am i correct???
  15. wayside34

    wayside34 New commenter

    Yes I believe my extra contributions were not counted. I say this as the written response from teachers pension with examples were indeed my figures I ended up with . That is how I knew the hypothetical calculation was better in my case.
  16. diddydave

    diddydave Established commenter

    Sounds right. Opting out is almost certainly a good move. You don't risk a great deal and the upside is quite significant.

    Whether to opt back in or not is a more difficult question because:
    a) we don't know how the scheme will have to be adapted to be legal again
    b) we don't know how they will compare what each scheme will give you
    c) we don't know how much longer you will teach
    d) we don't know what inflation will be

    Opting back in means you will be paying hundreds of pounds each month but may get nothing more for it...the key is whether your final salary when you finish gets above the salary currently shown on your benefit statement as the one used for the calculation.

    It is my opinion that they will treat everyone as having been on the Final Salary scheme up to some date, yet to be fixed, probably 2022, and compare that to what the current rules give you. I'm pretty sure they won't give you both! (that would be far too generous). Given the calculations I have done it is very rare to find anyone who is better off under the CARE scheme...certainly not to the extent where the thousands of pounds paid over the years by going back in makes a significant difference.

    I've had a number of colleagues share their benefit statements with me so I can run through some scenarios for them.

    So under the current rules you would be absolutely better off opting out for 1 month and then back in but those rules have GOT to change. The problem then is that the money being put into the Career Average scheme will probably not exceed that of you being treated as being in the Final Salary scheme so will just disappear as you get the 'best' option rather than the best of both.
  17. Iwanttoretire

    Iwanttoretire New commenter

    Hi Diddydave
    I would like to message you,if you don’t mind, but I don’t seem to be allowed to start a conversation! Are you able to start a conversation with Me?

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