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Past Added Years

Discussion in 'Retirement' started by JamDoughnut, Dec 7, 2019.

  1. JamDoughnut

    JamDoughnut New commenter

    Other recent threads have caused me to really look into and try and understand the TPS so thank you to all of the fascinating threads and comments.

    I’m looking into purchasing ‘additional pension’ via a lump sum and I have two questions if I may. I’m mid 40s and not planning on teaching for more than about 5 years when I will then run my own ( v small) business and draw on savings until I can access the TPS.

    1. I have a final salary element to my pension (NPA 60) and a career average (NPA currently 67) although I am opted out for this month! If I purchase past added years do you know if I will receive any ‘additional pension’ at 60 or 67? If 60, is the lump sum also increased by 3 x the value of the additional pension?

    2. Do you think additional pension represents good value?

    Many many thanks,

    JD
     
  2. diddydave

    diddydave Established commenter

    Firstly lets clear up the terminology as you are confusing an old enhancement scheme that is no longer available with the new flexibilities. "Past added years" is no longer an option (it was too good!). The current options are:
    1) Enhanced accrual (For the CA scheme)
    2) Additional Pension (For either scheme)
    3) Early buy-out (For CA scheme)

    The costs for each are dependent on your age so you will have to do the sums to work out what works best for you. I did do a comparison of faster accrual and additional pension you can see here: https://community.tes.com/threads/can-you-help-me-decide-which-is-best-please.796210/#post-12951262

    The additional pension fact sheet is useful: https://www.teacherspensions.co.uk/-/media/documents/member/factsheets/managing-your-pension/additional-pension-factsheet.ashx and tells you that the benefits of the main scheme are done separately to this - so the answer to 1 is no it does not get included in the lump sum calculation.

    Also to 1 you can choose to buy additional pension in either scheme, buying it in the NPA60 is more expensive, of course, than the NPA67.

    One thing to consider is seeing if you can, once you have left, is coming back to the profession before the '5-year' break is up as this will preserve the 1.6% boost above inflation that is applied to your CA benefits.
     
  3. meister

    meister New commenter

    “the '5-year' break is up as this will preserve the 1.6% boost above inflation that is applied to your CA benefits”

    So do you only lose the 1.6% boost if you have a break of more than five years?

    I left at the end of August 2019 aged 55 with mixed service (FS and CA) and intend to claim my pension at the start of August 2024 (this being my NPA for FS - my CA is not payable until I reach 67). Will I only get the inflation increases for the
    CA scheme?
     
  4. diddydave

    diddydave Established commenter

    You only get the 1.6% boost whilst you are working(so you will not get it from now through to 2024) but if you go back into the scheme before 5 years then it is treated as though you were working for that entire time...if you have a hefty CA pension then you might consider doing a week as a proper 'teacher' for a school in July 2024 (I'm sure you could get one to put you on their books for a week if you offered a low enough rate!)
    https://www.teacherspensions.co.uk/employers/calculators/methodology.aspx
    " However, should you return to pensionable service after a break of not more than 5 years we will treat the period of the break as having been in active service and amend the revaluation of your ‘pension pot’ in the period to include the additional 1.6% at the start of each year."
     
  5. meister

    meister New commenter

    Thanks - that’s worth remembering to do so long as they don’t change the rules by then!!
     
  6. diddydave

    diddydave Established commenter

    Yes, my CA I think is about £2000 so 1.6% would be £32, by 5 years comes to £156 (+ a bit of compound interest)...I don't think that's enough to tempt me back into the classroom for long! :p
     
  7. JamDoughnut

    JamDoughnut New commenter

    Many thanks - as soon as I pressed 'send' I realised that I hadn't changed the title of my thread - typical! I did, of course, mean 'additional pension' and I shall spend time looking at your spreadsheet! I received a quote from the TPS using one of their calculator things for the cost of purchasing additional pension but I couldn't see anywhere whether that was for NPA 60 or 67 and nor did it ask me which one I wanted a quite for.

    At first glance though 'additional pension' looks to be 'quite good'..
     
  8. HannahD16

    HannahD16 New commenter

    Hello All. Can I check my understanding of how to add to pension please? I have 2 quotes based on my age for both faster accrual and additional pension. Can’t figure which is best. I had wanted to add to my FS pension and take benefits at 60. Intended to leave CARE until 67 and use some savings to top up FS for those years til 67.
    However the quotes are based on me adding to my CARE only pension so I was curious about your take on it above DD. Is it possible to add to FS if I request this quote instead? Both quotes received relate to CARE only.

    Also, what would happen to the faster accrual monthly payment if I did choose that route? TPS have quoted me 1/45 figure of £367pm based on current age. How does this compound over next seven years and what would it’s likely final value be in topping up my annual pension? Thanks for any insights
     
  9. diddydave

    diddydave Established commenter

    On the flexibilities calculator page you can get your own quote and can pick which NPA you want them for: https://www.teacherspensions.co.uk/members/calculators/flexibilities.aspx So yes you can get additional pension added to the FS (NPA60) scheme - it will cost more than the NPA67 one of course because you get it for longer and sooner.

    On post 2 above I've put a link to where I go into the comparisons in more detail to see which is more cost effective - I think if you have at least 16 years to go then the faster accrual works out better but otherwise it's the additional pension.

    I note you don't say what difference the faster accrual makes to you in £ so I'll look at it for every £10k of salary and round to nearest £.

    1/57th of £10k = £175
    1/45th of £10k = £222
    An increase, per 10K, of £47

    In simple terms the amount added to the CARE scheme will improve over inflation by 1.6% a year. So in 7 years you will have 6 years of this improvement which gives:

    £47 x 1.016 x 1.016 x 1.016 x 1.016 x 1.016 x 1.016 = £52 (about a 10% improvement)

    To get this improvement you HAVE to be working and in the TPS scheme for those 7 years. (You can leave and come back so long as the gap is less than 5 years)
     
  10. HannahD16

    HannahD16 New commenter

    Thank you DD as always, really appreciate your maths wisdom. I really don’t think I could work beyond 60 to be honest.(if I make it that far) thus I will hope to be in a position where I can “park” my CARE for 7 years. Will this pension then be uplifted by the inflation amount each year instead? Thank you
     
  11. diddydave

    diddydave Established commenter

    Yes.
    If you were to take your Final Salary pension at 60 then the CARE one can be left and it will have the standard inflation figure added to it...(no 1.6% bonus), however if you take your final salary pension before 60 then you HAVE to take the CARE one at the same time.
     
  12. coolhands

    coolhands New commenter

    I don't think you can choose Faster Accrual if you didn't select it within 6 months of the changeover from the old style to the new style Career average so if Hannah's didn't do so I don't think she can do it now.

    EDIT the above is completely wrong I was thinking of the Buy Out flexibility
     

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