Opting out of Teachers Pension - Career Change

[Ebenezer_Scrooge]

Good morning PH wisdom,

Some financial advice would be very much appreciated here!

I have been in higher education for nearly 11 years, and had been paying to my teacher pension for the last 5 years. I have been admitted to a new postgraduate degree in my field, so hoping to move to financial sector in 12-18 months and leaving teaching career forever (hopefully).

Should I opt out of my teachers pension now, or just wait until I completely leave my current teaching post? I realize there is a good chunk of money coming out of my salary every month, so I might well just opt-out now as it seems like I can't even touch the saved pot until I'm 55 anyway? (I'm 35 currently)

Cheers

[foiled]

I'd be staying in a DB pension scheme for as long as possible.
Remember that pension contributions as taken before tax, so if you stop pension contributions your take home money doesn't go up by as much as you expect

[The Leaper]

TPS is very good by UK standards, so in general you should seriously consider staying a member and contributing for as long as possible. This is not advice: I know nothing about your personal circumstances so I cannot say if this is the best advice for you personally.

R

[Mazinbrum]

You sure you can access your pension at 55? I thought teachers were 60 or 65 depending on when you started.

[Catz]

If you opt out but continue working for a year or so that means your pensionable service history will only be 5 years instead of 6/7. It might not seem much now but every year counts when it comes to calculating your pension.

It also depends whether you’re able to transfer your teacher pension into a new pension scheme if you move into the financial sector. And what that scheme is. Or if you’re planning deferred membership. There’s a lot of info here https://www.teacherspensions.co.uk/members/faqs/ta...

I presume all of your pension is in the “new” scheme from 2015.

[CubanPete]

They did have an enhancement for retiring at 50 (that my Mum took).

I would pay as much into it as much as you can, unless you have a pressing need for the cash.

As a now near 50 year old the concept of being close to retirement would be amazing.

[JulianPH]

I am with the others here. It is a great pension scheme and you should get as many years in as possible, whilst you can.

[loskie]

Perhaps instead of opting out and if you can afford it you should look at paying additional contributions. But take advice. I'm in the civil service pension and do find it complicated

[Ebenezer_Scrooge]

Thanks everyone.

However, I'm not sure if this is a great scheme as some of you suggested? Just using the teacher pensions calculator on their website to estimate my final pension value (assuming I would have stayed in this career), and it seems pretty miserable, considering I would have retired at 65?

Both the annual pension + Lump sum values are pretty low...

[Simpo Two]

Ebenezer_Scrooge said:

Thanks everyone.

However, I'm not sure if this is a great scheme as some of you suggested? Just using the teacher pensions calculator on their website to estimate my final pension value (assuming I would have stayed in this career), and it seems pretty miserable, considering I would have retired at 65?

Both the annual pension + Lump sum values are pretty low...

Would that be reflecting the battering things have had this year? That could have wiped out much of the last 5 years' gains, so if the system is simply taking the last 5 years and extrapolating it forwards it might explain a low projected outcome. No idea if that's how it's worked out but it strikes me as a possibility.

[Catz]

Ebenezer_Scrooge said:

Thanks everyone.

However, I'm not sure if this is a great scheme as some of you suggested? Just using the teacher pensions calculator on their website to estimate my final pension value (assuming I would have stayed in this career), and it seems pretty miserable, considering I would have retired at 65?

Both the annual pension + Lump sum values are pretty low...

Really?

I’ve just stuck in an estimation of your age, a salary of £42k and a start date of pension as 1/4/2015 with retiral at 65.
The results on the calculator taking a 10% lump sum after 35 years of service are a lump sum of £81K and a yearly pension of £40k.
If you took the max 25% lump sum that would be £203k and still a yearly pension of £30k.

Seems a decent pension to me.
Providing we’re still able to get a pension of course!

[Ebenezer_Scrooge]

Catz said:

Really?

I’ve just stuck in an estimation of your age, a salary of £42k and a start date of pension as 1/4/2015 with retiral at 65.
The results on the calculator taking a 10% lump sum after 35 years of service are a lump sum of £81K and a yearly pension of £40k.

Yes, very close predictions. And it does seem pretty miserable after 35 years of service to be honest? £81k lump sum is a bit of joke, providing that what kind of bonuses could be have been gained in the private sector/field in those years so assumed it might be better to opt out anyway...

[200Plus Club]

Ebenezer_Scrooge said:

Catz said:

Really?

I’ve just stuck in an estimation of your age, a salary of £42k and a start date of pension as 1/4/2015 with retiral at 65.
The results on the calculator taking a 10% lump sum after 35 years of service are a lump sum of £81K and a yearly pension of £40k.

Yes, very close predictions. And it does seem pretty miserable after 35 years of service to be honest? £81k lump sum is a bit of joke, providing that what kind of bonuses could be have been gained in the private sector/field in those years so assumed it might be better to opt out anyway...

On top of a yearly £40k pension? A lot of people would rip your arm off for a chance at that

[craig1912]

Simpo Two said:

Would that be reflecting the battering things have had this year? That could have wiped out much of the last 5 years' gains, so if the system is simply taking the last 5 years and extrapolating it forwards it might explain a low projected outcome. No idea if that's how it's worked out but it strikes me as a possibility.

No it has absolutely nothing to do with any investment gains or losses....it’s a DB scheme

[Simpo Two]

craig1912 said:

No it has absolutely nothing to do with any investment gains or losses....it’s a DB scheme

Ah, I've never been in that cosy world

I would get your postgraduate degree and that exciting job in finance with big bonuses first, before jacking in anything.

Edited by Simpo Two on Sunday 27th September 13:57

[The Leaper]

Ebenezer_Scrooge said:

Catz said:

Really?

I’ve just stuck in an estimation of your age, a salary of £42k and a start date of pension as 1/4/2015 with retiral at 65.
The results on the calculator taking a 10% lump sum after 35 years of service are a lump sum of £81K and a yearly pension of £40k.

Yes, very close predictions. And it does seem pretty miserable after 35 years of service to be honest? £81k lump sum is a bit of joke, providing that what kind of bonuses could be have been gained in the private sector/field in those years so assumed it might be better to opt out anyway...

So, do you think that you could have done better over the past 35 years? Do you think that you can do better in the future years?

R.

[Dg504]

Ebenezer_Scrooge said:

Yes, very close predictions. And it does seem pretty miserable after 35 years of service to be honest? £81k lump sum is a bit of joke, providing that what kind of bonuses could be have been gained in the private sector/field in those years so assumed it might be better to opt out anyway...

I think most workers aged 35 and under would do anything for the deal you’ve got! Do you realise how scarce these schemes are nowadays, or am I the uninformed one (quite possible)?

Don’t forget bonuses are taxed as income for us ‘lucky’ lot - so £80k at 40% is £130k+ earned.

What are the stats for year groups and pension savings? I know a lot, myself included, of people around the 33-35 bracket have just the recently forced 3/4/5% contributions to date from the last (3?) few years. There’s a huge problem incoming in 30 years....

[JulianPH]

Ebenezer_Scrooge said:

Catz said:

Really?

I’ve just stuck in an estimation of your age, a salary of £42k and a start date of pension as 1/4/2015 with retiral at 65.
The results on the calculator taking a 10% lump sum after 35 years of service are a lump sum of £81K and a yearly pension of £40k.

Yes, very close predictions. And it does seem pretty miserable after 35 years of service to be honest? £81k lump sum is a bit of joke, providing that what kind of bonuses could be have been gained in the private sector/field in those years so assumed it might be better to opt out anyway...

Well, you have selected an appropriate user name.

You are in a majority taxpayer funded, guaranteed, index linked pension scheme that will pay you what is almost double the UK average salary throughout your retirement, on top of a lump sum.

Good luck with your move to the financial sector (I mean this, you may need it!).

[Stereolab]

OP

It might be worth contacting Wesleyan.

They will visit you at home for an initial free consultation on your pension and personal circumstances. They are good for not giving a hard sell or pointless emails afterwards.

[gregs656]

Ebenezer_Scrooge said:

Yes, very close predictions. And it does seem pretty miserable after 35 years of service to be honest? £81k lump sum is a bit of joke, providing that what kind of bonuses could be have been gained in the private sector/field in those years so assumed it might be better to opt out anyway...

Hmm.