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Questions regarding NPA60, Faster Accrual & Additional Pension

Discussion in 'Retirement' started by kancell10, Jan 29, 2020.

  1. kancell10

    kancell10 New commenter

    Hi all,

    Thanks in advance for your help and guidance.

    We are currently trying to get a clearer understanding of the detailed workings of my wife's pension. We are also seeking to top up her pension and give options for the future to allow early retirement.

    After a LOT of reading on this extremely helpful forum, we think we have a better overview of how the teachers pensions work these days as the introduction of CARE has made things a little confusing.

    Her scenario right now is 35 years old, part time 2 days a week in Scotland and with a 2006 joining date so she retains her NPA60. She had a combination of career and maternity breaks from 2016 until returning to work in 2019. Ultimately she will likely go back to full time employment in the next 3 - 5 years as the kids go to school.

    As we understand it, she retains the NPA60 scheme, however all future pension contributions are made to the CARE scheme. We believe she can therefore choose to retire at 60 but her pension pot with be subject to actuarial reduction. Does that sound correct? How can we understand what that reduction may be?

    We are also looking at options to increase her pension and have read up (but probably still don't fully understand) how faster accrual and additional pension works. In addition we will likely take out a SIPP with Vanguard as we hold S&S ISA's with them, which will give us options for income from 55.

    This is the point where we become confused, trying to define what route she should take to maximise contributions now and for the next 20 - 25 years across teachers pension and SIPP to facilitate options for earlier retirement.

    I guess we're trying to understand if it makes sense to buy additional pension or faster accrual in the CARE scheme, knowing it would be reduced (but by how much) if she took it at 60. Or would we just be better to contribute more heavily to her SIPP which we could draw income from 55/60 - 67 when she will reach SPA and able to draw down her full teachers and state pension.

    Phew....
     
  2. 50sman

    50sman Lead commenter

    You need to talk to TP or Wesleyan to get definitive answer.
    As far as I unit however the NPA of 60 only applies to the part of her pension accrued under that scheme. The rest of her pension (career average) can in,y be claimed at the new NPA age which at the moment is 67 but almost certainly won’t be when your wife gets there.
     
  3. cpob

    cpob New commenter

    strawbs and kancell10 like this.
  4. kancell10

    kancell10 New commenter

    Thanks, that's very helpful.

    Sounds like we'd have the option to take the SIPP at 55 to go part time, take NPA 60 to retire fully, then wait it out until 67 to take CARE and State Pension.

    I'll look at that document to understand actuarial reduction impact should she take it all at 60. Hopefully that will inform us to whether to increasing SIPP or CARE contributions would suit our needs.

    Based on another 25 years until NPA60 could kick in, would additional pension or faster accrual likely be a better option? I understand there are differences but not fully understanding which is the better option.
     
  5. cpob

    cpob New commenter

    I should have said, if she retires before 60 she can choose to either take both pensions (both of which will be reduced) or defer taking them. She can't choose to take a (reduced) final salary pension and defer the career average one though - that can only be done at 60.

    I would wait and see what the government are going to do with teacher's pensions in light of the firefighters union judgement before making firm plans, as they may put transition members back on the final salary scheme.
     
  6. kancell10

    kancell10 New commenter

    I didn't actually know anything about the firefighters pension claims, I've just read online, very interesting. We'll just perhaps stick extra in S&S ISA until the go forward position is clarified.
     
  7. diddydave

    diddydave Established commenter

    I worked on some comparisons a while ago...these two threads may be useful to you:
    https://community.tes.com/threads/additional-pension-or-isa.798316/

    https://community.tes.com/threads/can-you-help-me-decide-which-is-best-please.796210/#post-12951262

    In comparing the Additional Pension to the Faster Accrual I found that it depends on how long you work. This is because the Faster Accrual fund benefits from the 1.6% boost above inflation whilst the Additional Pension only get inflationary increases. I think if you work for at least 16 more years then the Faster Accrual becomes the most cost-effective option. However until the Government works out how to address the age-discrimination issue it's all a bit of guess work.

    Both of the flexibilities tie you to the Teacher's Pension Scheme whereas going 'private' allows you the to take one and not the other.
     
  8. kancell10

    kancell10 New commenter

    Thanks Dave. We're going to wait it out for a while to see how government addresses the age discrimination then make an informed decision. Ultimately the relative financial safety and ease of the teachers scheme may be worth being 'all in' in return for an additional 5 years work IF the NPA60, lump sum and actuarial reduction works in my wives favour. If not we'll just open a SIPP
     
  9. diddydave

    diddydave Established commenter

    One good aspect, from the pension finance angle, is that the maternity break in 2016 means that the hypothetical calculation will use the salaries from 2006-2016 and so long as her final salary when she does finally finish in, say 2023-2025 exceeds that she will gain the benefit of those years of inflation.
     
  10. Ivanhoe

    Ivanhoe New commenter

    Kancell10,
    If you and your wife are 35 then you will not be able to draw from a SIPP at 55.
    I believe it is going to be state pension age - 10 years for you to withdraw from a SIPP in future years.
     
  11. kancell10

    kancell10 New commenter

    I'm 39 but yes I'm aware that it's rising to 57 from 2028, and probably more by the time we get there. Hey ho, not much we can control there but we'll just focus on investing now and take it from there at a later date.
     
    Ivanhoe likes this.

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