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Private Sector Pension Advice

Discussion in 'Welcome lounge and forum help' started by morrisseykev, Jun 8, 2020.

  1. morrisseykev

    morrisseykev New commenter

    Hi all!
    I’m currently in the state sector and am going into the private sector from January. I’ll have to leave the TPS as they have opted out. I believe they are with Legal & General. I’d like to know if anyone is / has been / will be in the same situation and how this pension scheme works......I have 20 years built up in TPS
  2. phatsals

    phatsals Senior commenter

    Whatever you do, don't transfer out your TPS pension. Leave that well and truly where it is. In terms of your future company pension, who knows. There are many different types of scheme, only they can explain it to you. It won't be anything like a Final Salary pension.
    morrisseykev likes this.
  3. catbefriender

    catbefriender Lead commenter

    I second that, keep your money in TPS and if you can, put as large a lump sum in as possible before January 2021. Speak to them and find out

    a. if it is possible and if so
    b. ask them how much you could get back when you retire if you placed in say £5k, £10k etc.

    Remember, if you pay a one off sum into your pension, it may have tax implications for this tax year, so you need to get advice as to how it will affect you.

    Good luck
  4. morrisseykev

    morrisseykev New commenter

    Oooooooo thanks for that advice as I would never have thought about that.
  5. catbefriender

    catbefriender Lead commenter

    Glad to have helped and hope it's permissible. If you can get as much money into your TPS as possible, even forgoing a holiday this year, it may, just may pay dividends when you retire.
  6. diddydave

    diddydave Established commenter

    I agree with catbefriender increasing the TP pension is probably a good move (unless you don't have family dependents and die shortly thereafter - but in that case does it matter!)

    The scheme has limits as to how much you can put in: https://www.teacherspensions.co.uk/members/working-life/paying-in/increasing-your-pension.aspx

    And there are different ways of increasing your pension, the two probably of most interest to you are "Additional Pension" and "Faster Accrual". I believe you can do both as they have separate limits. From my calculations Additional Pension is the cheaper option (unless you can get at least another 16 years service in the TP scheme due to the 1.6% boost that FA gets that AP doesn't).

    From the tax perspective there is also an annual limit of £40,000 that you can invest in your pension - this does include the money you are already paying in. Further you only get the tax benefit on money that would have been taxed, so if you were earning £50,000 then only £37,500 would be taxed as you get a personal tax-free allowance of £12,500. Bear in mind that money, up to these limits, is not taxed so if you are a standard tax-payer at 20% you effectively only pay 80% of the cost (if you are a higher 40% tax-payer then the cost to you is 60%). It is possible to pay in more than £40,000 if you did not pay this amount in the previous couple of years BUT you do not get any tax benefit for those extra amounts. As you can buy AP as a lump sum it would be possible, if you have savings, to use the income. It may also be worth comparing the AP costs against that your new employer is offering - you will have income from January to March that, so long as you have the savings on hand before you leave in December, you could use them to buy AP instead of joining your new employer's scheme. The tax position is an annual one from April to March. (I would say that going into the new employer's scheme thereafter would probably be a good idea)

    One more thing to note is how the Career Average (and faster accrual) pension amounts are treated over the coming years. If you stay out of the TP scheme for more than 5 years then your CA pension will only increase by inflation but if you go back into the TP scheme before 5 years have passed then your CA pension will be increased by 1.6% on top of inflation for all of those years that you were out of the scheme.

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