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Retaining Best Pension from Best 3 Years out of 10

Discussion in 'Retirement' started by 4goggas, Dec 11, 2018.

  1. 4goggas

    4goggas New commenter

    I've read through several forum responses, and if I've missed a good thread on this topic, please would you post me in that direction?

    My best 3 years of salary out of the last 10 means that I should retire in August 2018 (TPA suggests that my monthly pension could go down after this). However, because of finances, I need to work for another year. TPA said to opt out and then opt back in again. Besides the fact that I should aim not to pass away whilst opted out, I don't really understand how they wouldn't just keep adding the years back on again when I opt back into paying my pension? Is this because I then become a member under the Average Salary Scheme?

    Any light shed on this is much appreciated.
     
  2. Dorsetdreams

    Dorsetdreams Occasional commenter

    I think that there has been some misunderstanding along the way. TP won't give advice, just facts, if they respond at all. You are quite right about opting out and straight back in: you would have to stay out for 5 years to freeze your final salary pension. Furthermore, being in the Average Salary Scheme doesn't freeze your final salary pension (however you get into it), because of the 'final salary link'.

    After some consideration of my own position, I've concluded that I'm best off staying in the scheme, despite a falling 'average salary' pension. But my salary only stagnated due to below inflation pay rises over that last 10 years; if you took a pay cut in the last ten yours you may well be in a very different position. Hope this helps.
     
  3. 4goggas

    4goggas New commenter

    Thank you - that makes more sense than what I've (not) been told. I did take a pay cut in the last 10 years, nothing massive, but it appears that 2010 and 2011 are pivotal years for inflation and pension adjustment.
     
  4. heldon

    heldon Occasional commenter

    If you do your research there is a big number which will drop out of the calculation next April. In Scotland anyway, 5.1%. Dorsetdreams what do you mean by "you would have to stay out for five years to freeze your final salary pension".
     
  5. Dorsetdreams

    Dorsetdreams Occasional commenter

    https://www.teacherspensions.co.uk/members/working-life/work-events/break-in-service.aspx

    " If you’re a protected or tapered member and have a break in service of more than five years after 1 April 2015 you’ll enter the career average arrangements when you return to pensionable service.
    .......
    If you’ve benefits in both the final salary and career average arrangements your final salary benefits are protected and will remain in final salary."

    But

    "When you retire we’ll use your salaries earned in career average to calculate your final salary benefits. This is called the final salary link."

    So, frozen it isn't, which was my point, although I did not express it very clearly. Protected seems to me a rather poor choice of word from TPS too.
     
  6. 4goggas

    4goggas New commenter

    Sorry - I may be a bit dense. I'm not too sure what you mean? I'm just trying to ensure that my pension doesn't drop after August 2019, which, currently, it appears it will.
     
  7. heldon

    heldon Occasional commenter

    Using the last three years in ten rule. The 2008 figure will drop out of the calculation next April. It was a high inflation number. This is in Scotland, contact the relevant people if in England and ask how they calculate the last three in 10, so you can calculate what works best for you.
     
    4goggas likes this.
  8. Brianthedog

    Brianthedog Occasional commenter

    Heldon,
    What you alsô need to remember is that it also depends on what your actual salary was at that time. My salary was pretty stagnant over the last 10 years, so my best years are 2018-11, but if someone else earned their highest salary after then, it may not make a difference.
     
    4goggas likes this.
  9. heldon

    heldon Occasional commenter

    Absolutely, all depends on you personal circumstances. If you went from class teacher 10 years ago to head teacher in the last three years for example.
     
  10. Brianthedog

    Brianthedog Occasional commenter

    Oops! Obviously I meant 2008. My figures I got from TP show that's if I wait until I'm 60, next November, then my revalued salary will drop by about 3k. It's currently dropping by about £40 a month.
    From 2008 to August 2011 my revalued salary is increasing my actual salary by between 5.6k to 7.7k. After that, for the next 2 years it stays at 2.8k, then gradually declines until September 2017 when it doesn't change at all. I've had not increase in salary in that time, apart from the regular annual increase as I was at the top of the pay scale over 10 years ago,
     
    4goggas likes this.
  11. Dorsetdreams

    Dorsetdreams Occasional commenter

    At a glance, that may seem very worrying.

    The more recent years are, of course, getting fewer RPI/CPI adjustments. But as time goes by, and those more recent years become old years, they will have more adjustments and become more valuable. They will, in effect, gain from up to ten years of cost-of-living inflation increases that we missed out on over the last decade.

    Don't let the apparent loss of value in those later years influence your thoughts on opting out.
     
  12. heldon

    heldon Occasional commenter

    As a case study I will share some figures with you.

    I stopped working at the end of June aged 56. I was on a conserved salary for the last couple of years- (salary didn't increase). I was a middle manager and my salary of reference is 11.6% above the salary which I was earning when I finished, due to the last three years in 10 calculation.

    My wife got a promotion in 2009 and her salary of reference is 7.26% above the salary she was earning when she finished.

    I believe RPI was used until 2010 and then CPI from 2011 onwards.

    There were some big number that helped the uplift, and kick in because of the lack of pay rises- thanks!!

    My pension will now increase now with whatever the CPI increase is as of Sept although in year 1, I will just get a proportion of that increase as it won't be a complete year.

    You can access RPI and CPI figures at the ONS website.

    As ever do your own research and make the right informed decisions for you.
     
    4goggas likes this.
  13. catmother

    catmother Star commenter

    @heldon Is the salary of reference the one given on the STSS yearly statement or is it one that is only given when asking for a more accurate estimate?
     
  14. heldon

    heldon Occasional commenter

    When asking for an annual valuation. In Scotland the calculator doesn't use the last three in ten. In the past you could ask for an annual valuation, when in-service. They will now only do it for over 55s or deferred members.
     
    catmother likes this.
  15. 4goggas

    4goggas New commenter

    Teachers' Pension employees won't give you a Salary of Reference. I believe that this is because if the amount that they give is one penny out, you may have your pension abated, and then they would have 'advised' you incorrectly. It took me a huge amount of effort to get some sort of calculation out of them for the Salary of Reference: take the highest salary in your three average pension years, multiply that by the CPI factor and minus your pension amount. I believe that you cannot earn above this amount INCLUDING your pension, if you take your pension and then work, either full time or part time. However, I'm not too clear on this last bit.
     
  16. paulstjohn2014

    paulstjohn2014 Occasional commenter

    It has been made very clear on these forums many times that if you AAB the salary of reference does not apply. To make it clear I will say again! You can earn anything you like from teaching without affecting your pension if you take your retirement benefits before normal retirement age for the scheme.
    This is made very clear on the TPS website.
     
    FrankWolley likes this.
  17. 4goggas

    4goggas New commenter

    Yes - thank you, of that I'm very aware. I am already 60 though.
     
  18. paulstjohn2014

    paulstjohn2014 Occasional commenter

    In that case your TPS pension and earnings from teaching cannot be greater than your salary of
    reference.
     
    4goggas likes this.

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