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pension opt back in or stay out?

Discussion in 'Retirement' started by lookingtogo, Aug 24, 2020.

  1. lookingtogo

    lookingtogo New commenter

    I really should change that user name...........

    A question for you wise ones, especially diddydave if you have the time, and don't mind? I am constantly amazed by how much advice and support you give on here - many, many thanks for all of your efforts.

    Anyway, to explain briefly. After MUCH deliberation I finally decided to get myself out of teaching - will hand in my notice next week and leave at Christmas. I have been in the game for 30 years and enough is enough. I am 2 years short of being able to draw a reduced pension at age 55, but that's ok as I have been saving and paying off the mortgage so can manage financially until then . I have to admit the relief I have felt since writing that resignation letter is immense.

    A couple of months ago I opted out of the teachers pension. My reason for doing so was that my best 3 in 10 was dropping of the end of the chart each year and I wanted to protect it by taking a break. I wish I had done this a couple of years ago, but hey ho. Anyway, I was about to do the paperwork to opt back in for the remaining 4 months until I leave. But then I thought - should I? I will pay about £1000 in pension in those remaining months, but will I actually benefit from anything from it (other than death in service cover?) Should I just stay opted out and keep the contributions??

    If anyone can advise then please do so. I am very much looking forward to joining the retirees here - not long now!
  2. diddydave

    diddydave Lead commenter

    You need to do the maths of the different schemes and scenarios.
    Luckily the scenarios are a lot clearer now the consultation has been published. You can treat your service from April 2015-March 2022 as being in either scheme.

    The benefit statement on teacherspensions.co.uk will show you pretty much where you are at under the choice of having that as Career Average.

    Using the benefit statement you should also be able to work out what it would be if you treated it all as the Final Salary scheme. You take the 'average salary' figure they give you (method A or B - whichever is the highest). Then get your service, that is all the years/days shown on the benefit statement as being in the FS scheme and then add to that the years and days in the CA scheme. (Just add up the days in the service history for that period and divide by 365). Take those two (salary and years) and multiply them together and then divide by 80. That will be what you should get for your Final Salary pension. (Well pretty close because it will be to the date you opted out and there will be a tiny amount of indexation to add).

    Then you can move on to doing the figures for the next 4 months.
    This is where it gets tricky.
    Firstly, it's unlikely that you finishing salary in 4 months will exceed that 'final salary' from 2 months ago - which is why you opted out in the first place I presume. That means those 4 months will not be used in that hypothetical calculation (the final salary pension you came up with in the previous paragraph won't get to use those 4 months) and this is the crux of the matter...you now need to work out what your 'final salary' will be in 4 months time...and that does mean doing the index-linking from the last 10 years...i.e. Jan 2011 to December 2020 and using those numbers to work out the 'final salary' (best 3 in 10)...multiply that figure by your length of service which will by 0.33 of a year more than it is now and divide it by 80. If that is less than the hypothetical calculation then, yes, it is not worth opting back in if you were to opt to have all of your 2015-2022 service counted as Final Salary.
    You then look at how much you'd get if you choose to have it as CA.

    The benefit statement does show you the method B and it also has the revalued salary figures that can help you work out what your 'best 3 in 10' will be come Dec 2020.
  3. lookingtogo

    lookingtogo New commenter

    Thank you so much for your prompt reply.

    I strongly suspect that Final salary will give me the best return. I also strongly suspect that the index link from 10 years ago will be higher - I am in fact having a pay cut for the final term (don't even ask :)) I will do the maths (or at least try) with your helpful calculations. I think that I will be better just having the money in my pocket now rather than paying into pension.

    Thanks again.
  4. lookingtogo

    lookingtogo New commenter

    Hi again. Gosh this is confusing! I thought I was quite good at maths!! My best 3 in 10 were way back from 2009, and higher than what I am currently on, let alone my reduced salary for next term - I understand that bit, it's due to more generous index linking in the past. So this is method B.

    I am trying to work this out, but I can't see how anyone with 30 years service, and who had steadily risen through the pay scale with some promoted posts on the way, would not be better off being wholly back in the final salary scheme - or am I missing something? And sorry to ask you even more questions, which you have probably already answered multiple times in other posts, but if all 30 years of my pension is back into FS does that mean that the lump sum is also worked out using all 30 years to calculate it? What about the pension age - does that know revert back to age 60 for the whole amount? When I draw my pension early at age 55 will the rules also have changed here too. Prior to McCloud my understanding was that I would loose a much larger % of the career average part of my pension as the final salary scheme part of it was not to be drawn in full until age 67 ?

    Sorry hope that makes sense?
  5. diddydave

    diddydave Lead commenter

    If you'd like to send me your benefit statement I can have a look and do some calculations with you.
    This sheet is one I did to look at the index-linking and see what effect staying in the scheme has of the final salary at different periods of time:


    You can make a copy of this.

    Lump Sum
    This is 3 times the Final Salary pension so whatever that is worked out to be it will also be affected. (This is the number one reason why the FS scheme is better than the CA)

    Pension Age
    Yes, your Final Salary scheme can be taken with no reduction at 60.
    However, when I've looked at comparing the schemes there isn't too much difference in taking them early (other than the lump sum!). I will have to see if I can dig out that spreadsheet, I know I did one for what I considered a standard teacher...that is one who progresses through the MPS, moves onto the UPS (this bit is becoming less 'normal') and finishes on UPS3.

    The Career Average scheme still has a pension at of 67 (or 68), the McCloud judgement does nothing about that. The scheme itself is legal and does not have any age discrimination. The age discrimination problem is with how teachers were transferred from the FS to the CA scheme based on their age.
    brook123lyn likes this.
  6. lookingtogo

    lookingtogo New commenter

    It would be a hug help if you could look at my benefit statement please. I am getting myself totally confused here! Is there any way I can private message them? Thanks
  7. diddydave

    diddydave Lead commenter

    Yes, start a conversation - under your logo/account in the top right corner... :)
    brook123lyn likes this.

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