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Opted Out of TPS pension or not yet in it? Read this

Discussion in 'Pay and conditions' started by jubilee, Apr 3, 2012.

  1. jubilee

    jubilee Star commenter

    To those who have opted out, or are considering doing so, be aware that there is talk of Final Salary pension Schemes being closed to new entrants within 6 years (could be sooner).
    Apparently, some teachers have been opting out early in their careers for two reasons :
    1) to save money when on their lowest pay points;
    2) to reduce the impact of the proposed Career Average calculation for pensions. They want promotion and intend to Opt back In when on higher salaries, so that their career average pay will be a higher figure for pension calculation (albeit with fewer years in the pension!).
    Don't miss the boat by staying out of the pension too long (or stay in it at all costs). This government could easily decide to close the scheme to new entrants without much notice.
     
  2. jubilee

    jubilee Star commenter

    To those who have opted out, or are considering doing so, be aware that there is talk of Final Salary pension Schemes being closed to new entrants within 6 years (could be sooner).
    Apparently, some teachers have been opting out early in their careers for two reasons :
    1) to save money when on their lowest pay points;
    2) to reduce the impact of the proposed Career Average calculation for pensions. They want promotion and intend to Opt back In when on higher salaries, so that their career average pay will be a higher figure for pension calculation (albeit with fewer years in the pension!).
    Don't miss the boat by staying out of the pension too long (or stay in it at all costs). This government could easily decide to close the scheme to new entrants without much notice.
     
  3. reg1950

    reg1950 New commenter

    I agree your general point jubilee but 'short notice' in pension scheme terms can't be overnight. They'd have to change the law for a start. There'd be plenty of time to sign up.
    Your point about boosting career average by opting in later is interesting. Does it work? ie can you ever make up by the higher career average what you've lost by having fewer years?
     
  4. DBizzle

    DBizzle New commenter

    That wouldnt work at all. Under the new system you get your 1/60th (1/57th?) of each year's salary as your finalpension payout. Ie if you work for 2 years and earn 20000 in year one and 21000 in year 2, your end pension is 20000/60 + 21000/60= 683 pounds a year. Ifyou opted out of the first year you would just get the 21000/60= 350 pounds a year.

    Mathematically, this is exactly the same as finding the mean salary then multiplying by how many years divided by 60, but i think looking at it this way is less confusing. Basically by taking a year out you are entirely losing money in your pension
     
  5. jubilee

    jubilee Star commenter

    I agree but the ATL have identified that some teachers are delaying paying into the TPS (or opted out when Career Average was mooted) in the belief that if they wait until they are on a higher salary, their eventual pension will be better. Perhaps they should put pension calculations into the Numeracy Skills test that all trainee teachers need to pass!
    If they were originally in the Old TPS, they need to Opt back In before there's a 5 year contribution gap or they will be put in the New TPS when they re-join.
    I believe that some older Heads have also retired early, thinking that they would avoid Career Average calculations when they would not even have been subject to the new calculation as they would have reached 60 in the Old TPS before Career Average was implemented for the first time. It might even be a factor in the number of Headships on the market that are proving difficult to fill.
     
  6. hitherejen

    hitherejen New commenter

    Anyone know how much they can change pensions in the next 37 years (until I'm 68)? It seems like at this rate I'll have to pay to retire, so maybe get out now tosort myself out as there won't be anything left by the time I get there (if I even make it)?
    I am worried about the extra contributions I will now need to make (an extra £51 a month) as this will stretch me when already stretched. Do I have to wait until 68 to retire? Could I in theory retire next year and claim my £846.56 as stated until I move on to the next life? Anyone able to explain the discrepancies between NUTs pension calculations and David Camerons?

    Thanks!
     
  7. marymoocow

    marymoocow Star commenter

    I thought that the proposed changes to TPS meant that most people below the age of 50/55 would have their TPS pension age rasied to 68.
     
  8. They are definitely changing from 'final salary' to 'career average', both of which are 'defined benefit schemes. Do you mean that there is talk of it changing from 'defined benefit' to a 'defined contribution' scheme (ie stakeholder type pension based on stock market). If so could you provide weblinks to any such stories please?
     
  9. jubilee

    jubilee Star commenter

    I believe that pensions like the TPS one will be closed to new members and the only alternative will be private pensions, where the link with salary (whether final salary or career average) will be lost. It will all be about how much you choose to fork out each month to a private provider, how good they are at investing the money and how well the Stock Market is performing at the time yoiu retire and have to purchase an annuity with your private pension pot.
    Teaching and other public sector jobs will become less appealing without a final salary/career average scheme that does not seek to make profits for fund managers.
    My sister has a responsible job in the Civil Service where she has had to write parliamentary briefing notes for MPs (not in London). Her f/t salary still does not match that of a teacher on M5 outside London but her pension is non-contributory and is what makes her salary palatable after so many years in CS employment.
    Take away the pension 'sweetener', which has always been considered as deferred pay by most public sector workeers, and see good graduates look elsewhere for employment. There may well be no recruitment issue for the public sector but what you will definitely see is a low calibre of graduate taking the positions, to the eventual detriment of the services on offer.
     
  10. I agree that getting rid of the final salary/career average defined benefits scheme would be a disaster for teachers (I'd strike over this for sure and for as long as necessary). But have you got any evidence that this is being considered for teaching and other public sector jobs?
     
  11. I opted out 2 years ago when I was saddled with a bill which I couldn't pay. Sadly, I have become used to the extra cash in hand - but am now looking at opting back in, as I have cleared that debt.

    Seeing the posts here regarding the fact one has to make up missed payments - what exactly does that mean?

    I am a Senior Lecturer at the top of Grade 7 of the HE unified pay spline.

    Also, what is the employees contribution at this pay level - I see from the TPS site, that it looks as if it will be 8% from me. If this is so, then what is the employers contribution, and are the new changes (i.e: lowering the 40% tax threshold, and the increase in employee contribution) going make my contribution seem more in real terms?
     
  12. jubilee

    jubilee Star commenter

    No-one has to make up missed years in the pension.
    It used to be possible to buy added years but contributors now only have the option to purchase extra pension income.
    Some people (whether they've opted-out or not in the past) decide, for instance, that they'd like an extra £1k per year in retirement and the TPS will tell them how much that will cost them. The cost can be paid in a lump sum or from deductions from salary over several years.
    When you opt back in, you will simply pay the percentage being charged at the time. The employer will pay their contribution . (The employer doesn't contribute to any extra pension your buy, which is why it's an expensive option).
    being a 40% taxpayer makes pension contributions CHEAPER as you get tax relief on all contributions. Paying out £3k per year in superannuation saves you 40% tax on that £3k.
    In some cases, paying into the pension and thus lowering your taxable pay to only 20% means that a teacher will retain Child benefit.
     

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