Like many teachers, you may have been too busy during term-time to pay much attention to your financial future, and that of your family. If so then the holiday period is the perfect time to make sure that your pension arrangements are in order, that you are maximising your benefits from Teachers’ Pensions, and avoiding any potential pitfalls.
Salary & Service Record
Your benefits in Teachers’ Pensions are determined by your service and salary record, which is held by Teachers’ Pensions. Employers have sole responsibility for ensuring the accuracy of this record, and unfortunately mistakes do occur
You can check your salary and service record by downloading your most recent Pension Benefit Statement from the members’ website:
If you think there might be an issue then you should contact the relevant employer and query the figures.
Death Grant Nomination
If you are married, or in a civil partnership, and you wish your partner to receive the lump sum payment that would be payable from Teachers’ Pensions in the event of your death, then you do not need to complete a nomination form. The Scheme Regulations ensure that your partner would automatically receive the Death Grant.
In other circumstances you should complete a Death Grant Nomination form. If no nomination has been filed with Teachers’ Pensions then the Death Grant would be paid to your estate and could therefore be subject to Inheritance Tax.
Remember to keep your nomination under review, as Teachers’ Pensions have no discretion as to where the Death Grant is paid. For example, if you have separated from your spouse, but not divorced, then your ex-partner would automatically receive the benefit, unless an alternative nomination has been made, or until the relationship is formally dissolved.
Your spouse or civil partner will automatically receive your pension in the event of your death.
You can also nominate your partner to receive a pension after your death, subject to certain conditions. You must, for example, have been co-habiting for a minimum of two years and be financially interdependent. The Teachers’ Pensions Nomination of Partner form should be completed in addition to any Death Grant nomination.
Pay more to get more?
The purchase of additional service is no longer available, however you are now able to buy Additional Pension in Teachers’ Pensions. This is calculated separately from your main pension benefits and the cost depends on various factors, such as your age, how much extra pension you want to receive and the period over which you wish to contribute.
For members of the new Teachers’ Pensions career average scheme, a further option is Faster Accrual. Rather than the standard pension accrual rate of 1/57th of your earnings each year, it is possible to purchase 1/55th, 1/50th, or 1/45th.
Additional Pension and Faster Accrual can both be purchased via the members’ website. Teachers’ Pensions also provide an online calculator:
Are you planning for an early retirement?
Teachers are currently able to retire and draw benefits from Teachers’ Pensions from the age of 55, however actuarial adjustments will be made to the pension to account for the fact that it is likely to be paid out for a longer period.
If you are planning for an early retirement then you can find out more about the early retirement adjustments here:
The career average arrangement of the Teachers’ Pension Scheme offers a standard rate of actuarial reduction, between the ages of 65 to 68, of 3%. However, you can choose to Buy Out this standard rate and retire at age 65 without any reduction if you’re retiring early. The Buy Out is purchased through regular monthly contributions throughout your career. You only have one opportunity to ‘Buy Out’ the reduction and this must be done within six months of you first entering the career average arrangement.
Retirement: a process, not an event?
Teachers’ Pensions offers a phased retirement option. This allows you to draw up to 75% of your accrued pension benefits and continue to teach in a reduced capacity. In order to qualify your salary must fall by a minimum of 20% for at least twelve months. The idea is, of course, that the phased retirement pension income will replace some or all of your lost salary and allow you to slow up, without stopping completely.
It may also be possible to retire completely, draw your full pension benefits and, under certain tightly defined conditions, return to a teaching position.
Well, probably quite a few things!
The areas covered above relate only to Teachers’ Pensions, and a checklist can never replace a thorough financial planning exercise.
If you were to die, would the Death Grant be sufficient for your dependants’ needs, or would taking out additional life assurance be a good idea?
What would happen if you were ill or injured and unable to work – would the Teachers’ Pensions ill-health pension income suffice?
Other than Teachers’ Pensions, should you be making other savings or investments for a rainy day, or to support future financial needs?
Enjoy the holiday and happy financial planning!