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pension opt out...how? effects?

Discussion in 'Pay and conditions' started by bigbluehat, Dec 27, 2011.

  1. Hi,
    Has anyone opted out of the teachers pension scheme? What happens and how long does it take and is it possible to rejoin later, say after a few years of not being in it. I've been teaching for 8 years and I'm 38. What happens to the benefits you would have accrued if you stop and start it?

    The thing is, I am a single mum of two with no other income except my wages and I am worried about when the new pension deal starts as I can't afford to pay the extra on top of my student loan. Sounds a bit dramatic, but I'm so worried.

    Thanks for any help in advance!
     
  2. DM

    DM New commenter

    Don't consider this - it really would be the worst mistake you have ever made in your life.
     
  3. But i dont think i will have much choice. Asfar as I know, you cannot pay less than the set amount that the student loans people take out of your wages. It is the only thing I can budge. Why would it be the worst thing, what would happen?
     
  4. DM

    DM New commenter

    It is likely you will spent about 30 years in poverty regretting your decision. I would be very surprised if there is nothing else you could "budge". Have you made a detailed and accurate list of your monthly outgoings?
     
  5. DM

    DM New commenter

    Assuming you earn £26,000 gross (a complete guess) you need to make a budgetary saving of £3.60 per week next year, another £3.60 per week the following year and an additional £1.80 per week the year after (total £9 per week). I'm hoping that isn't as bad as you feared.
     
  6. TheoGriff

    TheoGriff Star commenter

    You really do need to get proper advice on this.
    Like DM, I believe that this is a bad decision. I believe (although not 100% sure as it depends on dates) that it is even worse in your case as you probably joined the Old Scheme, which is even better than the Current Scheme which is better than the New Scheme.
    Could you get advice from your union before you make any decision that could have a terrible impact on your future?
    Best wishes
    __________________________________________________
    TheoGriff. Member of the TES Careers Advice Service.
    I do Application and Interview one-to-ones, and also contribute to the Job Application Seminars. We look at application letters, executive summaries and interviews, with practical exercises that people really appreciate.
    www.tes.co.uk/careerseminars
     
  7. DM

    DM New commenter

    Unions cannot give financial advice. I hold the relevant qualifications (I was an Independent Financial Adviser for 13 years) although my authorisation has long since lapsed.
     
  8. Middlemarch

    Middlemarch Star commenter

    You cannot just opt out and not pay into any pension scheme - you must make 'other arrangements' for your pension and nothing out there can match the TPS. This is from the TPS website:
    "A teacher may choose not to contribute to the TPS but to make alternative arrangements for pension cover, either by opting-out and contributing to another registered pension scheme or by participating fully in the State Second Pension (S2P)."
     
  9. DM

    DM New commenter

    You have misunderstood. Participating in S2P "costs" nothing.
     
  10. I fear quite a few people will be in your shoes if the new changes come into effect from April. I will do almost anything to stay in the scheme, as I am all too aware of what I will be giving up, but for some (many?) like myself and the OP, it may be a choice between paying into the scheme or paying the mortgage.
    Only you know what you can really afford to cut. Work out exactly how much extra you'll have to find each month, and then decide if your wallet can stand it. If you opt out, you can opt back in later should your financial circumstances improve, but obviously, every year's lost contributions is worth an awful lot more come retirement, so you should aim to stay in if at all possible. This is what I'll be doing.
     
  11. jubilee

    jubilee Star commenter

    Middlemarch is correct.
    The S2P does not cost nothing. If you opt out of the TPS, you are automatically opted in to the State 2nd Pension and your NI contributions increase.
    Being in the TPS means that you pay a lower rate of NI on all your qualifying pay. It increases by about 1.6% if you opt out of the occupational pension.
    If you earn £1800 per month gross and opt out of the TPS you will pay about £23 per month more in NI.
    oN THE SAME GROSS PAY, YOU CURRENTLY PAY £115 per month approx into the TPS. Stop paying that and your tax bill will increase by £23 too.
    So, save £115 per month and shell out an extra £46 in taxes and lose future pension benefits and current Death in Service benefits.
    If you pay increases with promotion or moving through Threshold you will also start paying Higher Rate tax (40%) sooner if not in the pension as your taxable income is a larger figure when the pension subscription is not deducted.
    If you end up in the Higher Tax bracket, this government has decided that you don't need Child benefit, so you will lose a significant sum of currently tax-free money too.
    There are people who would be better off paying into the pension as they'd pay less NI, LESS TAX nad still receive their Child/Family allowance.
    The new pension increases are being phased in. Any increases will see a reduction in the income tax that you pay, mitigating some of the extra pension deductions.
    Student Loan repayments are being altered and people will only pay base on earnings over £20k. They currently pay based on earnings over £15k per year. The changes will see everyone who is earning at least £20k per year saving £450 per year.
     
  12. jubilee

    jubilee Star commenter

    keep moreof your pay by informing the Inland revenue about the payments you make to the GTC and to your Union. They are tax deductible and you will save 20% at least on the amounts in question. Go back 6 tax years and claim for those expenses that you incurred and didn't claim for at the time. Do it quickly as they are changing the rules later in January 2012 and you'll only be able to claim back for 4 tax years.
    Claim tax relief on £60 (standard amount allowed) if you teach PE AND HAVE TO PROVIDE AND LAUNDER YOU OWN KIT. You can't claim it if they provide washing facilities at school, even if you don't use them.
    It means that you pay £12 less in tax in this tax year and get £12 back for past tax years. Prior to April 2008 (so tax years up to and including the 2007 -2008 one) the offset figure was £45, saving a PE teacher |(or somoene who taught PE in primary and needed a kit) £9 per year.
    Back claim for 6 years and get £56 back if you're a 20% taxpayer and £112 back if your top rate of tax is 40%
     
  13. DM

    DM New commenter

    I put "costs" in quotes quite deliberately jubilee. The OP would undoubtedly have a greater disposable income if she opts out. That doesn't mean that it would not be extremely foolish for her to do so.
     
  14. modgepodge

    modgepodge Occasional commenter

    Jubilee, I don't think this is quite right. Currently as you say you pay back 9% of anything over £15k. UNDER THE NEW SYSTEM, which starts in 2012, students will only pay back 9% of anything over £21k. These changes will not be applied to students who started university before 2012, as far as I know. Unless you are talking about something completely different (as you do say£20k not £21k)? In which case please post your source as it sounds excellent [​IMG]
     
  15. jubilee

    jubilee Star commenter

    Apologies. I've made 2 mistakes in my post. The new earnings Threshold is indeed £21k and I didn't realise that it only applied to those who take out loans from 2012 onwards. I've just trawled the SLC website and read about he Plan 1 and Plan 2 repayment schedules.
    When I first took out an SLC loan the earnings threshold for repayments was below £15k and was increased to account for inflation. I just assumed that the much heralded higher threshold would apply to everyone. Sorry for the misinformation.
     
  16. Middlemarch

    Middlemarch Star commenter

    It was still not true that it "costs" nothing, however. It might "cost" less than paying into TPS, but it still "costs" and it's misleading if people think they'll save all that they currently pay into TPS.
     
  17. It should noted that the 1.6% NI discount ends in April.
     
  18. DM

    DM New commenter

    Not for final salary occupational pension schemes although this is under review and may end in 2015 when S2P is likely to be abolished (see Pensions Green Paper).
     
  19. DM

    DM New commenter

    It really doesn't. You pay the normal rate of National insurance like every other employee who is not in a contracted out occupational pension scheme. This is not a cost. You might equally as well say that opting out costs the 14% employer contribution as this dwarfs the N.I.rebate.
     
  20. Can you earn more? Marking SATS, GCSEs (or higher)? Tutoring an hour or two a week?

     

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