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Pension query for part-time contract

Discussion in 'Retirement' started by scotslassie, Sep 26, 2019.

  1. scotslassie

    scotslassie New commenter

    I was looking for some advice on this. I left my full time position a year ago - and as I was just turned 60 I drew my pension. I considered holding off until I was 65 but on doing the calculations I reckoned I would be in my mid 70s before I was worse off taking it now. I was then offered a part-time position equivalent to one day a week whcih I started about a year ago. This academic year it will be upped to about 2 days a week.
    I am contributing to the teachers 2015 scheme. I'm not sure how long I will keep this part-time position going for, probably until end of session 2020-21 by which time I will be 63.
    My query is - is it worth paying into the pension scheme or should I not bother and reduce the deductions from my part-time salary?
    I was thinking of it as building up a small saving but when the time comes will I be able to collect it as a lump sum if I do this?
  2. diddydave

    diddydave Established commenter

    As always professional advice where someone can look at your exact circumstances would be your best option, however you may want to consider the following.

    You need to have 2 years in the new scheme to qualify for benefits, otherwise you'll only get back your payment (minus tax). It looks as though you plan to do this.

    The 2015 scheme costs you between 7.4% and 11.7% (for your exact % see this: https://www.teacherspensions.co.uk/...embership/contributions-and-calculations.aspx, in return you get 1/57th of your salary for life (after your NPA) which is equivalent 1.75%...so that, by my maths, puts you in positive territory 4 to 6 years after your NPA...but probably sooner given that your 1/57th is increased by 1.6% above inflation (whilst you are working).

    If you decide the TPS scheme is good them why not look at 'faster accrual'?

    You have the choice to opt out of the TPS and pay into a private pension which you can take as a lump sum - but there are tax implications on this. (You get 25% tax-free but the rest would be taxed at whatever rate it takes you into). You may want to discuss opting-out with your employer to see if you can negotiate a better pay rate, it is in their financial interest as well as they, currently, have to pay TPS 23.6% of your salary amount to cover the pension costs. If you opt out you are saving them that amount...so why not see if they'll share it with you.
  3. Sundaytrekker

    Sundaytrekker Star commenter

    I’m paying into it as Additional Service After Retirement and have so far accumulated a new pension currently standing at just under £700 a year. That will continue to increase and be worth adding to my existing pension when the time comes. Another thing to consider is that by paying in to TPS you will then qualify again for death in service benefits. For part time teachers this is three times the full time equivalent salary less any lump sum already received. Not to be sneezed at. So, if you have a partner then it might be worth the insurance aspect in addition to the pension.
    diddydave and HelenREMfan like this.
  4. phatsals

    phatsals Established commenter

    Definitely worth paying in. You don't need to be in two years, as Sundaytrekker said, it's Additional Service After Retirement and as such you aren't starting from scratch. I'm not sure you can even claim back your payments once you've paid in. The only caveat is that if less than I think 1 year fte it's paid as an annuity rather than monthly pension.

    You pay in, your employer pays in and you get tax relief. It's better value than a SIPP and you have the additional beneit of life insurance.
    diddydave likes this.
  5. scotslassie

    scotslassie New commenter

    Thank you very much everyone for the advice. It looks like I should continue to pay in. I hadn't thought of the insurance aspect Sundaytrekker. Does that still hold even if it is only two days FTE?
  6. Sundaytrekker

    Sundaytrekker Star commenter

    Yes, it seems to be a perk for part timers that it’s three times the full time salary that’s quoted for Death in Service Benefit. They would take off an amount equivalent to the lump sum you’ve already taken. That’s what my benefit statement says.

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