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Taken a break age 52. Impact on pension of returning part time?

Discussion in 'Retirement' started by chocolate.eater, Apr 17, 2019.

  1. chocolate.eater

    chocolate.eater New commenter

    Hi all,
    I’m currently taking a break after years in the same school where I worked 0.8. I’m considering whether to take another part time teaching job and want to understand how this will impact my pension.

    I am a transition member and know about the best 3 consecutive years in 10, or final 12 months.

    I am looking at a 0.6 job with a 1 year contract, and the one I’ve just left was 0.8.
    If I did this for just the one year, is it worth it?
    It won’t then be worth taking the final 12 months option(which was my highest salary), so I would have to take the 3 year option, which would be lower than my current 12 month best option, but I would have another years contributions.

    HELP please, I don’t want to muck up my already not great pension any further!
    Thanks in advance for any advice/opinions
     
  2. fariduddin

    fariduddin New commenter

    I suggest look at the full time eqivalent pay for the final salary section of your pension. Also contact your union and ask to speak to their specialist who can look at all scenarios for you.
    Good luck with it. I know how hard it can be to get all the facts.
     
  3. diddydave

    diddydave Occasional commenter

    You need to get expert advice from someone who can do YOUR exact figures as it sounds as though you have some peculiar circumstances.

    My understanding (and I am no expert) is:
    1) If you take a new contract you can always make sure that you are opted out of the scheme so when you retire your 'last 12 months' is the last 12 months IN the scheme - so preserving your current status.
    2) Are you sure your last 12 months is the best? I ask this as it is unusual as when past salaries are considered they are increased by inflation - which for the past umpteen years has been higher than any actual wage increases. (My salary from 10 years ago is about £10k more than the one I finished on because of this)
    3) If you work a 0.6 contract then, as a transition member, you don't get a 'year' added to your service - that number of years is already fixed. (but your salary figure as used for the final salary scheme will be the full-time equivalent salary). You do add 1/57th of your actual salary to the career average scheme)
    4) As a transition member the extra year (or rather 0.6) won't be used for your final salary portion of the pension, so any drop in the best salary figure is going to hit that part.
    5) You career average pension increases by 1/57th of your salary, so if your salary is £57,000 after a year your pension has increased by £1000. (and will be index-linked)
    6) Any payments you have already made into the career average will be revalued by inflation + 1.6%

    So it all depends on how many years you have in either scheme, how much of a drop losing your best salary is and how long any new contract would be.
     
  4. diddydave

    diddydave Occasional commenter

    (oh and as an aside but may be of interest to you...
    Employer contributions to the teacher's pension is going to be 23.68% from September - if you decide to take the job but to 'opt-out' you may be able to persuade your employer to give you a higher actual salary conditional on you being opted out)
     
  5. chocolate.eater

    chocolate.eater New commenter

    Thank you both so much for your speedy responses, so kind of you both to take the time.
    I had not appreciated that salaries were adjusted (only just started looking into it). I need to do some calculations on that to see which would be my best 3 years (or final 12 months).
    I hadn’t considered opting out either, so lots of calculations to do!
    Thanks for your help and hopefully these questions and answers may benefit some other readers too.
     
  6. diddydave

    diddydave Occasional commenter

  7. chocolate.eater

    chocolate.eater New commenter

    Thank you, I will do that and see. Really helpful! Thanks for your time and effort.
     
  8. Prim

    Prim Occasional commenter

    I was also thinking that as you are part final salary and part CARE would the bulk of your pension payout be based on the final salary scheme anyway? My understanding is that you can't make anymore contributions to this and all you are doing is building up your CARE scheme. Even though contributions will increase if you decide to go at 55 I wonder if it is worth contributing at all to this scheme? Something I am thinking about
     
  9. Dorsetdreams

    Dorsetdreams Occasional commenter

    Just to be clear, in case there is any doubt, you don't get to select an option. The best calculation (for you) is selected automatically when you retire. But working out in advance what that calculation will be does make sense.

    Contributing to the CARE scheme is almost certainly a good option - it is an excellent pension. Not only will your accrued sum increase with more work, but what you've already built up grows more quickly if you stay in. The only reasons for not contributing would be opting out to preserve your best 3 years in 10, or if you have a very short life expectancy. I doubt the latter is the case or you wouldn't, I hope, be considering any more teaching. The former is only an issue if you took a serious pay cut six or seven years ago. Looking at your 'revalued' years on your last pension statement may help you decide, but it is easy to misinterpret the fact that your best years are all 'old' years. Your more recent years will get better as they become old years.
     
    Prim likes this.
  10. diddydave

    diddydave Occasional commenter

    Yes, you have to check what your best years are. If you've had pay jumps above the standard pay awards (all of which have been sub-inflation) then it may be that your best years aren't the 10th, 9th and 8th year back.

    However, if the more recent ones are lower now they will always be lower as they are all increased by the same inflation figure every year.
     
  11. Dorsetdreams

    Dorsetdreams Occasional commenter

    No, the more recent years get fewer years of adjustment. As they get older they will improve. It would be a serious mistake to bail out of the pension, to protect one's best 3 in 10 years, based only on the inevitable fact that the good, older CPI adjusted years are dropping off. But it might well make sense to do so if one took a serious pay cut coming up to 7 years ago.
     
  12. diddydave

    diddydave Occasional commenter

    I think we may be talking at cross purposes. Clearly opting out is a serious matter and not to be undertaken lightly and I would suggest is only likely to be of benefit to someone who is within at most 2 years of their intended retirement date - as always anyone considering it MUST do their own calculations. The OP here I think is in a particularly interesting scenario as taking a 0.6 contract for a year will not add much to their CA pension but could, potentially, knock a lot off their Final Salary pension.

    The mathematics of revaluation can be difficult to understand as they do work out your pension to the point you leave the scheme and if you opt-out early this can appear to be disadvantageous BUT they do then increase the pension from that point to the current day using the CPI figures. Mathematically it works out the same. So if your best years are 10, 9 and 8 years ago (as most teachers who have not had any pay increases beyond the standard are likely to be) and you opt out to preserve those for just 1 year then your average from those 3 years is increased by one more year's worth of CPI than the average from 9, 8 and 7 years ago (which in that 1 year's time would be their new best 3 out of the last 10).
     
  13. chocolate.eater

    chocolate.eater New commenter

    Thank you for all your replies.
    I am a bit further forward.
    My last 12 months salary is higher than any revalued 3 year period in the last ten years, using my TP statements and diddydaves calculator (very easy, thank you!), so the final 12 mth period would currently be used for my pension payout should I not return to a teaching job.

    Yes, I am only now contributing to the CARE scheme if I take another job. (and have been since 2015)

    It looks like I would lose that higher last 12 months calculation if I took a part time role and paid into CARE. (Yes, I would get more 1 more years service, but I would be paid out at a lower rate if I stay in continuously, because it would be a lower final 12 months (because of working PT) or the best 3 years out of 10)
    Have I got that correct?

    Along the way on the TP site, I have also discovered an incorrect 6 month gap in my employment history between the final salary and career average scheme changeover dates, which hopefully is being resolved.

    The way these calculations work isn't really encouraging teachers to return to work on a part time basis, or move to PT later in their careers.
     
  14. diddydave

    diddydave Occasional commenter

    To get a definitive answer I'm afraid you will have to get an expert in or talk to someone at TPS who can look at all the ins-and-outs.

    When you refer to an extra 'years' service I'm concerned. For your final salary portion you cannot add in any more years - you only have the years of service up to 31 March 2015. This is why any drop in your 'best' salary will have a significant effect. Since then you've been paying into the CARE scheme and for that they don't care how many years you've worked or what pay scale you were on, they simply add 1/57th of your pay (actual pay not FTE pay) to your pension figure each year. The other bonus of that is they increase that pension pot, if you are still working, by 1.6% more than inflation.

    A downside of the CARE pension is that you have to wait until you are 67 to get it in full and if you want to take your final salary part before you are 60 you HAVE to take the CARE one at the same time and take a big AAB reduction on it.

    Another possible fly in the ointment for you to consider is whether your final 12 months of salary would be 'restricted'. If you had a large increase in the last 3 years (about £6000 or 10% if larger) then they will work on a lower figure.
     
    Last edited: Apr 23, 2019
  15. chocolate.eater

    chocolate.eater New commenter

    Thanks diddydave. Yes, by an extra years service, I just really meant, some more into the overall pot, thus putting up that section of the pension. (& obviously having some income for the year worked!!)

    If I took the final salary one at 60 or later, do I have to take the CARE one with it?
    No, my salary hasn’t had any big jumps in the last 10 years, just steady increases due to going up through the pay scales, but the final 12 months is definitely the highest, even after revaluation.

    Sounds like it may be best to opt out and ask for some extra pay instead of the employers pension contributions and put that straight into a SIPP instead.
    Thank you once again for your insights.
     
  16. diddydave

    diddydave Occasional commenter

    If you take the final salary at 60 you can leave the CARE in place (and work and contribute more to it). You only have to take it if you take your final salary before 60, and take the reduction. (and it's quite a large reduction, for example of you take it at 55 your final salary pension is 83.3% of that portion but the CARE is 54.6% of it.)
     
  17. Dorsetdreams

    Dorsetdreams Occasional commenter

    Chocolate.eater, you are quite right, the old final salary scheme meant that stepping back a bit and taking a lighter role could only be done within 7 years of retiring, or one's pension would suffer. The best 3 in 10 rule was invented to provide that possible slow-down period.

    But it seems to me, from the second quote, that you can do whatever you want without damaging your 'final salary', until you are 59. I would do that, just whatever you want, including the 0.6 contract. And keep paying into the career average scheme. But if, in 7 years, you have not gone back to a full time role, consider bailing out them. Certainly nothing to worry about yet.
     
  18. Prim

    Prim Occasional commenter

    Surely having to take your CARE pension at the same time as your final salary pension if you decide to retire at 55 would impact upon your employment/pension rights? None of us asked for this to be put in place and by rights we can take our final salary within 10 years of NPA, since when has this changed for CARE? E.g. we are being forced to take this 12 years in advance of its maturity date, something wrong there? I'd prefer just to take my final salary at 55 and the leave my CARE pension in place until I actually need it.
     

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