Teachers give years of dedicated service to the education system and are rightly rewarded with an attractive Teachers’ Pension Scheme. Acumen understands just how important it is for teachers to plan for the future and to have all the facts at their disposal to enjoy a top class retirement. In this blog, we look at the various teachers’ pensions options and give you our top tips for a long and prosperous retirement.
Different options for teachers pensions
Teachers’ pensions are the lifeblood of your retirement income. The Teachers’ Pension Scheme (TPS) gives a pension linked to a teacher’s salary at or near retirement and is one of the most valuable benefits of a teacher’s service.
Other benefits include:
- A substantial contribution from your employer, which is currently 14.1 percent of your salary,on top of your own contribution.
- A regular income after retirement and the right to a tax-free lump sum payment when you retire.
- Ill-health benefits if you become too ill to teach and financial protection for your family, and other dependents, after you die.
There are various teachers’ pension options available to you. Early retirement, known as Actuarially Adjusted Benefits (AAB) are benefits which you can take before Normal Pension Age (NPA) if you’re aged 55 or over. Normal Age retirement (NPA) is the age at which you can take your pension rights in full and depends on when you joined the scheme. For instance, if you joined the scheme on or after 1 January 2007, you have an NPA of 65. If you joined the scheme before then you continue to have an NPA of 60, provided that you don’t leave teaching for more than five years.
If you return to teaching after more than a five-year break, you’ll be eligible for Mixed Service retirement. In such cases, your pension will be calculated in two slices. Phased retirement gives you the option to access your pension benefits from age 55 without having to give up work completely. While Premature retirement
can be negotiated at the discretion of your employer and is not an automatic right. Ill-Health retirement benefits are payable if you become permanently unfit to teach due to illness.
Top Tips for retiring teachers
As with any form of retirement planning, having a coherent strategy is the key to surviving on your teacher pension. You may want to consider some of the following ideas that Acumen can help you to bring to action.
Lump sum and state pension deferral
The lump sum element of your pension is part of your ‘pension salary.’ It needs to last for the rest of your life and should be used wisely. You’ll also be entitled to a state pension (as long as you have made at least ten years’ worth of national contributions). You don’t necessarily have to draw on this if you can survive comfortably on your teacher’s pension and deferring your state pension means increased payments when you do come to using it – but is it worth deferring? Is the return you get for doing so a good deal? It needs careful consideration and there are other options to consider which could allow you to benefit from further tax relief. It’s worth having a chat with us to make sure you’ve got all the facts in order to make the right decision for you.
Equity release and high yield investments
If you own your property, but don’t have enough money to live on, an equity release scheme could provide the solution. There are other high yield investment opportunities, beyond high interest bank savings, to consider. In both instances, Acumen can offer tailored independent financial advice to make your money work for you.
Clear any debts and plan your estate
If you have outstanding debts, such as loans, that charge a high interest rate it may well be worth your while trying to clear these or to consider new loan deals offering better interest rates. Estate Planning is also often pushed to the bottom of the ‘to-do list’, along with preparing a will, but it’s important to consider the ‘who, what, when and how’ of estate planning.
Acumen’s experience with specialist teacher’s pensions
Acumen advisers have more than 100 years of experience offering retirement advice and tailored retirement solutions. We’re proud of our vast experience of working with teachers to maximise the returns on years of dedicated service.
Speak to one of our knowledgeable advisers today to find out how we can help you to make the very most of your retirement with:
- Cash flow planning.
- Choosing the best way to provide you with the income you need.
- Managing your investments, including pension lump sums in a tax-efficient way.
- Comprehensive inheritance planning.