This is invaluable information as I approach taking early retirement at age 55 - finally someone who makes this understandable and gives us a tool we can use to make informed decisions. Thank you, thank you, thank you!
Having worked in Financial Services (for more years than I care to admit!), before retraining to teach, I consider myself financially adept. As I approach retirement and focus more acutely on my pension options, I realise how little in fact that I do know!! Thank you for so much for sharing your specialist knowledge of the TPS and the relevant legislation that relates to it. How refreshing it is to have impartial information without being pushed (metaphorically) down the road of expensive 'independent' advice.
Yes, so long as you understand that I am NOT a financial adviser so these are my opinions and explanations of what I believe to be relevant to most teachers. I actually would always recommend that independent financial advice should be taken when talking about these kind of figures and that once you are committed to a course of action it can be for the rest of your life. One financial piece of advice I did hear on this subject was..."So, you think independent financial advice is expensive...what until you find out how expensive NOT getting proper advice is". However, that said, one of my aims for these series of explanations is to give teachers the knowledge so that they can ask the "right" questions of their advisers.
I was searching about the McCloud Judgement to find out about how it affects my teachers pension - that thankfully brought me to your video here, and more thankfully to your channel of excellent well explained videos on different aspects to consider and plan for in relation to one's pension. I very much appreciate what you're sharing on your channel, it's so helpful when looking at one's pension and planning for retirement, thank you.
@@dfountain Just wonder if someone who stops teaching a year before the final salary pension matures would be better off not taking the pension until 60? We could survive a year without the income. Thanks, Hugh
Ahh...yes...this hinges on what defines "better off". I go into the maths in this video: ua-cam.com/video/IJZOzhl3FH8/v-deo.html There is also this sheet that will let you see the effect of taking the pension(s) early: docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing On the above sheet there are several tabs and if you look just at the one related to the final salary pension it does have what I call the "break-even" age...personally I would consider taking it at 59+11 months since you would have to live well into your 90s to make waiting that extra month worth it! Another thing to bear in mind (other than the fact that I am not a financial adviser) is that you could get access to other pension pots between 59 and 60 and use those to fund the gap. The primary advantage the the TP has over other schemes is its index-linking whereas most private schemes are reliant on market forces, or buying annuities that often have more restricted index liinking.
@@dfountain Thank you very much indeed David for your advice, we are so grateful. You are a star. Incidentally, I have discovered that you can make extra contributions to the state pension scheme once you have retired, up until the start of the year of your state pension age, this enhances your state pension and the contributions are paid off after a handful of years. Have a fabulous 2023. Hugh
I heard about all of this for the first time today having just received an email about it from the TPA! I have been living outside of the UK since 2003 and knew nothing about any of this. I retired last May on my 60th birthday. Because I was born before April 1962, I was never transferred to the CAS and I was paid my lump sum when I retired. How do I stand now? Will these changes affect me at all? Thanks for the excellent presentation and for taking the time to educate teachers about these important issues. I feel that they should not be allowed to change the scheme once you start the job. It's like moving the goal posts in the middle of the game. In the US, which is where I taught after leaving the UK, they introduced new tiers to the pension scheme that only affected new hires. Of course, each new tier was worse than the last, but the benefits of those already in service were protected with each change.
Thanks so much for your work and sensible presentations. Does the inflation factor change the payouts on the McLoud this year as the last reference on the sheet was 2021. I'm just wondering whether we will benefit this year from the high interest rate or is the pension not liked as easily as this? Once a again thanks!!
Inflation gets added to both career average and final salary pension figures. If you are still working then the career average amount gets an extra 1.6% as well. The sheet is a reasonably sensible way to look at which scheme was best at the end of the final salary scheme in 2022, going on beyond then both of the McCloud options will have more career average pension added to them but that should be roughly the same increase for each option.
Hi David - this is very useful indeed, thank you - one question, you say those born after 1965 go onto career average but your graph shows Sept 1965? is that just as an example? As the date given on the graph for 1962 is April and you mention after April 62?
Yes, for those who were in the NPA60 final salary scheme the date they were, illegally, moved to the career average scheme depended in their date of birth Those born before April 1962 were ,moved on 1 April 2022 (after they reached 60). Those born after September 1965 were moved on 1 April 2015 Those born between these two dates would have been moved at some point between April 2015 and April 2022. They were known as the "tapered" members because the date was a sliding scale, represented by the slope in the graphic at 6:40
@@cristinafenn3548 Your new "rollback" statemet has one of the two options you will be given, that of having 2015-2022 all in the final salary scheme...for most teachers this is likely to be the best option, but you won't have to choose until you take the pension!
@@dfountain Ahh you are wonderful! You've answered what was my next question before I got to ask it! Thank you so much. I had checked the TP and in fact that is just what had happened;) Thanks so much again;)
Brilliant advice here. Thank you. One question, your really helpful spreadsheet does it not need to take account of the number of years of contributions in order to be more accurate? Or does it calculate a rough pension based on the total as stated on the benefit statement?
It could be refined to put in the exact dates but in order to keep it simple and because the only period that gets altered is the 7 year stretch from 1 April 2015 to 31 March 2022 I have just asked for a part-time rate. The part-time rate you enter in B16 can reflect whether those years were full time (in which case it is "7 years" that is used) or whatever part-time rate you were on.
@@dfountain Thank you very much. If one was full time but did not contribute for a two year period due to being abroad (2007-2009) , would the calculator still be reasonably accurate?
Yes...the two year period you mention is outside the McCloud period of 1 April 2012 to 31 March 2015 and so the figures in the statement already account for it. HOWEVER, your statement will NOT include the pension based on the "hypothetical calculation" that will arise from the break in 2007. This calculation uses your salaries from 1997 to 2007 and as those were a peak in teaching salaries measured against the cost of living it could produce a better pension than shown on your statement. I recommend you look at this video: ua-cam.com/video/sFGJbmtMQHQ/v-deo.html
13:36 thank you for this video. I was born May 1962. I moved to Scotland to teach in 2015. I was out on CARE. I didn’t transfer my English TP over. Having watched your video I’m worried I made a terrible mistake in not bringing over my pension. I did have a break before starting in Scotland as I needed to find a job. Can you advise at all?
Bear in mind that I am only an ex-teacher and not a financial adviser. This is a particularly difficult one to consider and I don't know how it will be handled. Not transferring your TPS to the Scottish system could well have been a decision that you made at the time BECAUSE of the changes to the final salary scheme and as such you could argue was a contingent decision on the illegal handling of the transition. Problem is that I don't think this is actually covered in the legislation that has been written to remedy this. If you reached a peak in your salary before you moved to Scotland then the damage will be minimal, but if you have moved higher since then I suspect you would have been better off making the transfer. Problem is, as ever, is that these decisions have to be taken at the time and will never measure up to what could have been achieved if you could see into the future! Sorry that isn't really much help at all.
Thank you so much for your detailed explanation. If you don't mind me asking, how is it that you lost out on over £2000 a year? I'm currently beginning to look at my options, and I want to make the right choices.
It was more a missed opportunity than a loss. If I had known about the protections surrounding breaks in service I would have been able to lock in a top salary and have the benefit of it 15 years later - I explain this rule here: ua-cam.com/video/qP5XkqTM1f8/v-deo.html
Hi David, thank you so much for putting this together. Could I ask you one question please? Like many teachers my best 3 years were some time ago. I briefly left the pension scheme which meant that my highest earning years were used for the final salary calculation. If the remedy now goes up to October 2022, which years will be used for the new calculation?
You are looking at a situation where different sets of "10" years are used, and then compared at which point you will get whichever produces the best pension. You want to look at what is called the "hypothetical calculation", I explain about that here: ua-cam.com/video/sFGJbmtMQHQ/v-deo.html What is crucial in your situations is that the final salary you had in the 10 years prior to the break needs to be LOWER than the final salary you have when you do, finally, leave teaching. This sounds counter-intuitive since you would think a lower salary would produce a lower pension but this is counteracted, quite often overwhelmingly so, by inflation. The difficulty in answering your question is one where I would be more comfortable being able to look at your statement and put it into real £ and pence for you because the answer has a number of conditional dependencies. Firstly, the "years" are used in two ways in the calculation of the final salary pension. There is the "final salary" figure - this uses the 10 years prior to any break from the scheme but ALSO the 10 years up to the end of the scheme...and so long as you haven't had a break of more than 5 years, this can include future years even though everyone moved to the career average scheme on 1 April 2022. Then there is the number of years "service", and this is where the remedy following the McCloud judgement can make a difference. You have your service pre-1 April 2015 that will always be counted as "service" for the final salary pension but there are also these 7 years from 1 April 2015 to 31 March 2022 that you are going to be able to choose whether they get included in the final salary scheme or the career average scheme. We then have this interaction with the hypothetical calculation that just adds another layer of complexity. If your final "final salary" is lower than it was at the time of the break then the years AFTER the break do NOT get included in the hypothetical calculation that is made to the time of the break, but if your final "final salary" is higher then those years DO get used in that hypothetical calculation. If you have read all that I think you can see why it would be best to see someone who understands this stuff and have them go through your full service history with you.
What a minefield! I am 59 (60 in November)and been teaching since Sept 2008 and therefore going to be affected by the McCloud judgement. My issue is I am going to 0.7 from September. I do not really know what the best thing to do is.
Hi John and yes it can be tricky. If you want to get in touch through my blog, dfountain.co.uk, I can go through the numbers and options with you if you'd like. As you started in Sep 2008 you are in the final salary 60ths scheme that has a normal pension age of 65. You also have the option to take phased retirement since your salary is dropping by more than 20%. Leaving your NPA65 final salary until later does mean it will get a lower reduction for being taken early but if you've been at the top of the pay scale for 10+ years then you should really check what is happening with your best "final salary" as it is quite likely that is actually going DOWN.
Hi David, I have watched this video again and used the spreadsheet. I know the calculations provide an estimate but I was trying to understand now that 31st March 22 date has passed, and you produced the video and spreadsheet some time ago, and all new contributions are now accumulating in the career average from the 1st April 23. Would it be best to use a pension forecast from the 31st March 22 and then just add on the career average calculation since that date as it can't be converted to a final salary amount to get the best estimate calculation? I appreciate your good work with your informative videos.
Yes, that would probably be the best method - using the March 2022 statement. Then the amount that gets added will be, roughly, 1/57th of your annual salary since then.
Yes, McCloud and Sargeant were the Judge and Firefighter who were used by their unions to push this all the way to the highest courts and won the judgement. That and, indirectly, all the union members across most of the public sector who took strike action in the first place when their pensions were threatened that forced the Government to make the concession that did turn out to be illegal.
Great video. Thank you. I started paying into the TP in 2004, so I believe in eligible for the final salary pension, retiring at 60. I have a further 14 years until I reach 60. In total this would give me 28 years (full time) of pension. Am I correct in thinking I am still eligible for the final salary scheme and that I can choose whether to stick with the final salary or move to career average scheme (whichever is better for me)? Thanks
Afraid not. The final salary scheme can only include the "years" of service up to 31 March 2022. The McCloud judgement determined that it was the WAY in which teachers were moved to the career average scheme that was illegal. The scheme itself is legal and so every teacher, from 1 April 2022 must be in the career average scheme. As you started in 2004, therefore, the most amount of "years" that you can have in the final salary scheme will be 19 (probably a bit less as I suspect you didn't start until September 2004. You are going to be allowed to choose your changeover date from final salary to career average as EITHER 1 April 2015 or 1 April 2022. Some time in the next 18 months the statement on the TPS website will start to show you, side-by-side, the value of each of these dates for the two schemes.
I do have one, it's just a little more complex than my others so I tend to only use it when I can see someone's statement to check for other issues as well...but if you want a go, it is here: docs.google.com/spreadsheets/d/1qQStpIF5Djsl31_IWJ_73oB9r-XJwZXvdf9qoY3gWPY/edit?usp=sharing
Hi David, Would you be able to give me an idea of what my pension will pay out if I retire at different ages? It's complicated as I didn't begin teaching until I was 31, and have just started, age 44, doing faster accrual at 1/45th. I teach English so numbers and calculations are not my strong point! Thanks.
Yes, make a copy of this sheet to enter your own figures: docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing I also suggest you look at my comparison in the value between paying for "faster accrual" and buying "additional pension": ua-cam.com/video/rHuqGnfhivM/v-deo.html
The Government publish them each January to apply to the following year. The 2022 tables are here: www.gov.uk/government/publications/public-service-pensions-increase-2022 In essence, unless they change the law, this year will see the increase from April 2022 to April 2023 be 10.1%. The intervening months will be 1/12th of 10.1% for each month.
When we were moved into the career average pension in 2015 I opted to buy out two years so I could retire at 65. The letter about this mentioned I will get a choice now as that but out does not apply to the final salary scheme but I have not seen a good explanation of what that choice will be or when I will be asked to make it. Do you have any idea?
Yes, the legislation and the new regulations tell us WHAT has to happen but we are just waiting for the detail of exactly how MUCH you will get. You are going to be given some choices, the one that I believe will be the most popular will be where all the money you have paid to the scheme for any "extra" bits, such as Buy Out, will be taken as buying "additional pension" in the final salary scheme instead. So, if you paid £100 a month for the Buy Out they will work out how much Additional Pension that would have bought instead and offer that to you. The other choice is to take a refund of your contributions but as this will have income tax deducted from it I suspect it won't be as valuable as taking the option to convert your CA "extra" to the FS "extra".
Question, which I hope you can help with: I had a break in pensionable service from 1/1/14 to 31/8/15. I was on 1/80 scheme up to that point. I was born in 1966. I have been back in pensionable service since 1/9/15 on 1/57 scheme. Do I qualify for the choice of converting or not? Many thanks.
Yes, you are eligible. Only a break of more than 5 years removes a teacher's eligibility. If your break was one where you "opted out" rather than being where you were not employed, you are also going to be able to reverse that decision and, upon paying the missing contributions, have the service reinstated. Be careful though, it may be that being out of the scheme at that time could produce a much better final salary pension via the "hypothetical calculation".
Have you picked up any vibes about how the knock on effects of a decision to change will be handled? E.g. backdated changes to income tax already paid in previous years, interest paid (or owed) on amended lump sums and so on. I'm in the similar Civil Service pension scheme, and my initial thought is that a change from FS to CA would mean that I would need to repay part of my non-taxable lump sum, and instead would receive a slightly higher taxable pension (dating back to June 2015 in my case). My numbers won't be huge since I only worked 61 days after April 1st 2015 before collecting a actuarially reduced FS pension but will be much higher for people who worked on until 2022. Just wondering who would administer the change (the pension provider or HMRC) and so on.
Most of the stuff is in the legislation "Public Service Pensions and Judicial Offices Act 2022" and I think we can fill in a few gaps from the way the existing schemes handle "late" payments. INCOME TAX The legislation as it stands states that backdated payments will be made as soon as they are processed in that tax year and be taken as being paid in that tax year. So, the payments do not automatically get set against the previous years in which they were supposed to be paid. This could lead to more income tax being deducted if these additional amounts pushed someone into a higher tax bracket. However, the legislation also states that individuals are going to be able to make a claim, to HMRC, if this is the case to have their overpayments of such tax to be cancelled if they can show they wouldn't have paid tax at that level if they'd been paid in the previous years. To be honest this is probably only going to affect a small proportion of pension payments. This is because those who have been in receipt of pensions for the longest time, like yourself, won't have many years in the career average scheme and so the differentials will be small. Those with the full 7 years in the CA scheme will only have been retired for a short period by the time they get the options sorted and so will have less of a backdated period to cover. LUMP SUM The lump sum itself is non-taxable anyway, so it is only on the differences in the annual pension. The difference in the FS pension and the CA pension isn't, in most cases, that significant. You suggest you might have to repay some of your lump sum if you went for the CA option but this won't be the case because your pension was based on you being in the CA option anyway. You would only get a lower lump sum if you were moving service you had in the FS scheme TO the CA one. There is a small group for whom this might happen, that is those who were tapered members who did not transition on 1 April 2015 but at a later date. Almost all of the calculations I have done thus far show very minor increases in the annual pension when compared to the effect on the lump sum and so I don't think many would make that choice. INTEREST The legislation says that "interest" must be paid, and charged, on late payments or repayments but doesn't specify what rate this will be at. Taking the current scheme regulations as the basis for this we can see that in those regulations the interest rate is set at the Bank of England's base rate, so I expect that will be what is used.
Thank you for your very helpful videos. I took early retirement March 2021 at 57 with 35 years service. Could you make clear how the transitional protection process (McCloud remedy) for those who retired. Will I get a choice for those years of service when I was illegally moved from final salary in the same way as those in service? Because I took my pension early, does that affect the remedy? Thank you
Yes, you will get exactly the same choices as those who have not yet retired. I think you may be a tapered member so the two choices will be different to what you have now. You can choose to have 1 April 2015 to when you left in either the career average scheme or in the final salary scheme. Having taking the pension makes no difference to the remedy options, though if you decided to "sell" some of your pension to get a larger lump sum you might want to look again at that decision.
Thank you very much. Yes, I am a tapered member. I have looked at the case studies on the Teachers' Pension site, and with your excellent points about "comparing apples with apples," I feel far more confident about the choice to make in October. I did not sell some of my pension to get a bigger lump sum. I liked your video on whether you really lose 20% by taking your pension early. Keep up the excellent work. @@dfountain
Hi David I had a break in service between 1/10/2014 and 6/04/215 when I started my new teaching job I was put straight onto the career average scheme having previously been on final salary scheme since the late 1990’s Would this break in service result in my not be eligible for the McCloud judgment? Thanks for any thoughts on this matter Gina
No it does not affect your eligibility, only a break of more than 5 years can do that. Your break of 7 months is not a problem. All teachers born before October 2015 started the Career Average pension on 1 April 2015, so this isn't a problem for you. So long as you were also in the TPS before 1 April 2012 then you are eligible under the McCloud judgement.
Hi David. Thank you for the excellent videos. Can I clarify - If you are born before 1962, are you able to stay on final salary arrangement after the McCloud Judgement case in 2022? Thank you-Alastair
That is not one I am absolutely certain about. My understanding is that you have full protection only up to 1st April 2022 at which point only the Career Average scheme will be in effect. I will have a look through the proposed legislation again to check.
@@dfountain Hi David, so basically, we are all going to the 'career average' scheme after April 2022 and so I presume TP will re-calculate our pensions? Thanks again for your reply and videos. Alastair
I found an answer on the TPS website that confirms that from 1 April 2022 the only scheme in operation will be the Career Average scheme. In this case I strongly suggest anyone in that position considers whether they need to opt out for a month (March or April 2022) to protect their final salary pension. This is because they will no longer be adding 'service' to that calculation and as we have had over a decade of below inflation pay rises and a proposed pay freeze coming, the "final salary" that is going to be used in working out their pension is very likely to be falling due to the way it is calculated using inflation adjusted salaries from the last 10 years.
@@dfountain Thank you very much David. Yes, just started to scour the TP website and there is some useful information about all this. Yes, we all go over to Career Average Scheme 1 April 2022. TP say just to wait for any further news on this bit.
Hi David. Will you be offering any advice re people who have made decisions regarding their pensions before the age discrimination was proven? I believe that there will be an opportunity for these people to perhaps seek compensation after October 2023.
Bear in mind that I am not a financial adviser so I limit myself to explaining aspects of the scheme rather than trying to tell anyone what to do. Getting the facts so you can make an informed decision is key of course. The remedy legislation (Public Service Pensions and Judicial Offices Act 2022) provides for only one decision taken at the time to be rectified. That being where a member chose to opt out because they didn't want to be in the career average scheme. The scheme MUST make provision to allow the member to reverse their decision and restore their opted out service through this part of the Act: 5 Election for retrospective provision to apply to opted-out service (1) Scheme regulations for a Chapter 1 legacy scheme must make provision so as to secure that an election may be made in relation to relevant opted-out service in an employment or office. HOWEVER...if they choose to do this then they will be asked to pay the contributions that they would have paid at the time. At the moment it is not clear if they will be allowed to pick and choose which parts of their opted out service should be restored of if it will be an all-or-nothing option. There is NO provision to allow members to go the other way either, they are not going to be allowed to retrospectively opt-out of the period. I will be looking at this closer once the secondary legislation has been made clear, not least because members are only going to be allowed to reverse their opted out period within 12 months of being told what the changes mean to them. There is also a significant possibility that opting back in could make their pensions worse due to the fact that teachers have had over a decade of below inflation pay awards or pay freezes.
@@dfountain Thanks for that. I was wondering whether there would be any provision for people who had retired earlier than they might have because they had been moved into a less generous pension scheme and felt it wasn’t worth it given the later retirement age and the extra money they would lose going early in the 2015 scheme compared to the final salary one. Also people who had taken a step back from a higher paid post to do a lesser paid post because the final salary element no longer applied. (Both these situations apply to me!)
I think these are outside the scope of the remedy legislation and would require you to undertake independent legal action. There may be some legal firms who are pursuing such cases. The issue of the final salary one though is something I think you have been misinformed about. The salaries, even after the end of the final salary scheme itself, continue to be used in the calculation of that part of the pension. Anyone still working who was previously in the final salary scheme, unless they have a break of more than 5 years, will still have their final salary figure based on their final 10 years. If they were to work on until 2050 then the 10 years being used in the calculation of their final salary would be 2040 to 2050. (This is referred to in the TPS documentation as the "Final Salary Link")
Hi David, thanks for the clear information. Although it doesn't seem to match my situation. As I started teaching in July 2012, your video states that I should have been placed straight onto the Career average scheme. My TPS employment history states that I went onto the Final Salary 60th scheme until April 2015, at which point I was moved onto the Career Average scheme. I spoke with TPS, who said that according to their system I'm not marked as someone affected by the McCloud judgement, but the operative (who admitted to being new to the job) couldn't clarify why not. I'd be interested to know your thoughts on this.
That sounds correct. (and so yes, sorry - I hurried through that bit and messed up...the period up to 1 April 2015 is the final salary scheme and the career average scheme didn't start for anyone until then) The cut off date for McCloud eligibility is 31 March 2012. You started after that date and so are not affected by the McCloud judgement and won't be given the choice as to which scheme your 2012-2022 service is in. This is the nuance of the age discrimination case. ANYONE, no matter what their age (hence no age discrimination) who started in the TPS after 31 March 2012 was put in the Final Salary 60ths scheme that has a normal pension age of 65 and they all, again with no reference to their age, on 1 April 2015 started in the Career Average scheme.
Hi David. Thank you for your easy to follow video it was really useful! It’s so kind of you to make it your mission to help others 😊 I am in a similar boat to the above person. I started teaching in 2013 so have been put on the final salary 60th scheme?! Until April 2015 where it changed to CA. I was born in 1975. Does that mean i remain unaffected? Will I get the choice to change or will it remain the same with two retirement ages? (As you’ve probably picked up ….. I’m ready to retire asap!) Thank you.
Hello Dave. I have received contradictory advice from the people at teachers pensions. I retired last year after thirty years service. One of the advisors said all teachers who have already retired would benefit after they had chosen from the two options presented to them. The other said only a small percentage would actually receive any additional money and even then it would be minimal. Can you shed any light on this? Thanks
Sure, but only by doing the maths with each person, as it does depend heavily on their last 10 year's salary profile (or any previous breaks in service's 10 year history). Suffice to say the lump sum difference alone for you is likely to hit, or get close to, 5 figures. There really isn't any need to 'guess' at this - the calculation isn't too difficult so long as you have your most recent statement, I have a "rough" conversion calculator here: docs.google.com/spreadsheets/d/1aKYA2cPirQjKje6KGU54jNo5R6o0dtyNp0wuGZn_pfU/edit?usp=sharing I did get very irritated with the "case studies" that TPS put on their website as they have heavily weighted the profiles to favour the career average option (i.e. teachers on the NPA60 scheme working to 65! This profile gives no benefit to the NPA60 final salary scheme because, unlike the reduction you get for taking it early, there is no corresponding enhancement for taking it 'late' and favours the career average option as the reduction applied to it is far less than if the person had left at 60). So, I made some of my own - examples on my blog dfountain.co.uk Now, I've done probably hundreds of these calculations with teachers to come up with the McCloud choices and the vast majority are going to be better off in the final salary scheme for the period 1 April 2015 to 31 March 2022, especially if they were in the earlier NPA60 scheme (pre-2007 starters). In most cases they are getting a small increase in the annual pension but a massive increase in the lump sum - often reaching a 5-figure difference. These cases make an easy choice for the teacher of course. There are a fair number for whom the annual pension under the career average choice is slightly better but, in the vast majority of those cases, the lump sum is far worse and easily outweighs the pension difference. However, each person will need to make that choice. Under all circumstances the final salary scheme does give a larger lump sum for the earlier NPA60 final salary scheme. For each year you were in the transition period it will be 3/80ths of the final salary MORE. So, if you were in the transition for the maximum of 7 years that equates to 21/80ths of your final salary more than you'd get if you took the career average option...or for a standard classroom teacher finishing on around £40,000 than is a difference in the lump sum of about £10,500
Hello David, I wonder if you would be able to help me get some idea of what my final pension could be with or without the use if the remedy period? I am super struggling with my vision so have had to retire early. I am having trouble with the cells putting in the figures. If you were ale to help what information would you need from me?
@@dfountain Hello David, can you confirm that you received the document that I sent to you. With the issue of my vision there is a reasonable chqnce I may have sent it to somebody else. Really appreciate your support with all of this. Regards, Steve
Hi David.. after watching one of your videos I looked a the table of revalued averages relating to my last 10 years. I discovered that from this month my best 3 years average with method B starts to go down. If I opt out for a month (or less?) I know that I will lose the employers contribution for that month. Will I have any difficulty in re-enrolling in the scheme and will the employers contribution remain the same following my short break? Thank you for your very informative videos.
This applies to the TPS in England and Wales...Scotland doesn't operate the same 'hypothetical calculation' protection (just mention it considering the McC in your name). NI I think, but not had it confirmed by them, also doesn't. That said, then opting back in is a simple online form in the same way that opting out. I'd probably alert your payroll to what is happening and why just so they can be prepared (and it forms an email trail should any problems arise!). Any break of under 5 years results in you going back in to the scheme as though you'd never left, except missing a month's contributions etc - everyone is in the career average now anyway. To work out how much you are sacrificing from the CA scheme simply divide your gross monthly pay by 57. For example, top of the upper pay range is £41,604 per year. Per month that is £3,467. 1/57th of that is £60.82. So, taking a month out of the TPS for this person would mean they don't add ~£61 to the annual CA pension (that value based on taking the pension at their state pension age).
No "opting" is for whole months only. If, on the other hand, you leave one post and get another a few days later then you will also have a break which will qualify for the hypothetical calculation. For example, finish at one school on 5 April and start at a new one on 7 April - however teachers' contracts are generally for whole terms so it would need a special arrangement with the schools.
Thanks very much. Very useful. I have retired and was under the final pension scheme which was easy to work out. I am trying to workout my wife’s who will be under the Mcloud judgement. She has worked already then from 2022 in April on the career average scheme. She will probably then retire at either 55, 56 or 57. Clearly early! Is their a calculation I can do for all these factors please. That is the normal pension age bit, the Mcloud bit and then the career average bit. Thanks.
Yes, it is possible and as she's under 55 it's not too difficult because one of the options, having April 2015 to March 2022 in the career average scheme is ON her benefit statement. The alternative option, where April 2015 to March 2022 is put back into the final salary scheme is only a little trickier. If she was full time in that period it's a straight forward 7 years extra. So, look at what is shown on the final salary pension. Divide it by the years of service that is shown on the statement and then multiply it by 7. Add that to the final salary pension. That adjusts the pension up to 31 March 2022. Then for the period after that she will be in the career average scheme. For that simply divide her annual salary by 57 to get what is added in a year and then divide that by 12 to see how much she will be adding to the CA part every month.
Hi David, asking fir a colleague. He’s 50. In 2012 he was a deputy head. Had to go back as a main scale teacher for the last 9 years! He thinks that he will be able to use that salary to calculate his 1/80 pension as it will be protected under the mccloud judgement. I’m not sure it will. I believe that it will be only the best 3 years from the final 10 years he works. Any ideas?
Afraid I agree with you. McCloud does nothing to 'freeze' the 10 year period. Unless he has had a break in pensionable service he is stuffed! If he still has one year being counted in the best 3 then he needs to opt out ASAP for a month. It won't be as good as having all 3 on his DH salary, but better than nothing! Actually, he should probably get in touch and let me help him see what is going to happen to his final salary over the next few months so he can make a properly informed decision.
Hi David - I started teaching in 1995 and have worked full-time since so am impacted by the McCloud judgement. Would it make any difference to my lump sum and pension if I were to get a better paid teaching job now (Sept 2022) or would it make only an incremental difference as it would only impact my average salary component? Many thanks
Without seeing your full employment history I cannot be sure. I suggest you look at another video called "The Pay Plateau" where I discuss this. But generally... As you have not had a break of more than 5 years then your current and future salaries WILL be used in the calculation of your final salary pension. Whether a better paid post this September will make a difference does depend on whether the pay is better than your existing final salary. Even if it is better it also depends on how much better it is. You should check your statement to see what period of time your best final salary is based on at the moment. If it is the last year, or last 3 years, then the increase would have to be significant as inflation running at over 10% means any pay raise of under that figure isn't going to make any improvement - and in fact could result in a lower pension that could be possible. See the video I have done on this year's pay rise: ua-cam.com/video/hUywJcrKIUA/v-deo.html
Impossible to say for certain without looking at your full employment history, particularly if you've had any previous breaks. However, if your current best salary on the statement is shown as method A and your pay increase in September is below inflation then, yes, a month out could produce a better FS pension. Similarly, if it is Method B and the dates used in that run from 2012 then, again, a month out would secure their use in the future no matter how much longer you worked for.
Hi David - thanks for that my best 3 years are September 2012-August 2015 (Method B) - but barely more than I earn now. Am I safe to assume that my pay in September 2022 onwards (given a pay increase that surely will be coming) will take me over this previous peak and therefore I would not need to take a break from the TPS (eg like you, I reckon my peaks in the 2000s would have been far higher than the ones I have enjoyed more latterly!).
Hi David thanks so much for this information Is it possible to contact you so I can discuss my personal situation as I am 53 and thinking of retiring early and have a few questions? I have tried to seek a financial advisor but none seem to be interested when I say it’s related to the teachers pension scheme Thanks Gina
Fantastic Dave, thank you so much, I feel that I am in a bit of a situation as I am currently in the NPA 60 scheme and was going to retire at 62+5 months which is August 2023. Is my understanding correct that I would I still get my Final Salary scheme up until 31st March 21 and then 1 Year & 5 months in the career ave scheme. 1) I don't want to loose my rights to final salary + lump sum 2) is it really worth working for 1 year 5 months to get career average which would be reduced as I would only be 63
I would strongly suggest you get one of the Union associated companies in to go through the numbers with you as you have a wide range of options open to you and your situation is complex with respect to already being over 60 and able to take your pension at any time. You CANNOT lose your rights to your final salary + lump sum pension between now and August 2023. However, taking the NPA60 pension at any point will mean that it uses the Final Salary at that point and from then on you would be building a new pension in a new Career Average scheme. And as for your 2nd question, I would say yes - even though the CA scheme is not as good as the FS ones, it is still a worthwhile investment that pays a decent return. You are paying in around 10% and will get back, through the pension at 63, just over 1.4% a year...so by the time you reach 70ish you will have been paid back all the money you paid out. There are two parts to the FS pension. The FS salary and the length of service. The FS salary is something you need to look at as it may be going down (more than a decade of pay freezes and below inflation pay rises creates this anomaly). You have until April 2022 to increase your service. I would be looking to work out what these two figures would do for your pension each month between now and April 2022. I suspect that there is no advantage to you delaying taking the NPA60 pension beyond April 2022, even with abatement, unless your pay is likely to increase over inflation between then and August 2023. But do check this with TPS, as I am not certain how they handle such a case. I say this (and remember I have no qualifications in this area) because there is no 'enhancement' for taking the NPA60 pension 'late'. You can take the NPA60 pension at any time once you have reached the age of 60 without needing a break in service - you can simply opt out of the pension scheme for the month in which you claim those benefits...and then opt back in the next month to add to the new CA scheme.
The final salary schemes do not have a NPA of 67, that is the career average scheme. There are just two final salary schemes, those who started before 2007 will be in the NPA60, those who started in 2007 or later will be in the NPA65 one.
Sorry; I am not very IT literate. I don't know what a "blog" is; I suspect it is a dreadful abbreviation. I would be most grateful for your help, but would I need to make my details public? I am unwilling to do that. Regards: P C Hall
You're right it is short for a web-log, an online journal where the owner can pretend to be important and publish what they consider is vital information. Mine is basically a website where I post links to these videos and my spreadsheets. No registration or disclosure of your data is required.
May I just ask, publicly, one question, please? Given that I have been in receipt of my pension for some years, do I have anything to worry about? Thank you.
There is a very small mathematical possibility that the two options you will be offered will both be worse than what you have but I have yet to see it for real. If you transitioned to the career average on 1 April 2015 then there is no chance you will be worse off. If you didn't transition to the career average at all then there is no chance you will be worse off. The vast (vast) majority who did move to the CA scheme will be better off.
@@dfountain kay. Thank you for this information. I'm afraid I have no idea about the answers to your questions. Can this be found on the TP website? I am very reluctant to get TP involved at all. Essentially, I had to ring them two or three times a day, for six months, to get my pension put into payment, and to get my lump sum paid. I thought that was the end of it then, but, apparently not. If you can give me any advice about how to proceed, I would be very grateful. Thank you.
All you have to do is wait. They have to contact you with the two options. Before you choose they have to tell you how much each option will be worth. They are going to prioritise those, like yourself, who are already receiving a pension but the deadline for them to do this is October 2023 (the law governing this hasn't actually been passed yet so they cannot do anything just yet anyway). Bear in mind this only affects any service you had after 1 April 2015, so it is not likely to be a large proportion of your pension anyway that is affected. Your transition date depended on your birthday. There's a list here: www.teacherspensions.co.uk/employers/advising-members/eligibility/~/media/93CC7173567A46B2A3D99E4D242FCEE9.ashx If your birthday was before April 1962 then your pension has been worked out entirely in the final salary scheme - and is likely to be as good as it could be. If your birthday was after September 1965 then your pension was worked out using the maximum amount of career average time. In either of those two cases apply to you then the amount you are getting will be one of the two choices they give you. i.e. you cannot lose unless you choose the worse option!
Thanks, appreciate the explanation. The TPS seem pretty useless though. No mention of this on their site and when I did a practice r7n of completing the forms there js no mention of a choice. And when she wrote to ask for an illustration for if she retired a year early, they replied they couldn't because they didn't know what her pension was! (It's there on the TPS site but only for retiring at 60...)
The choice cannot be made yet as the legislation to allow this is currently still passing through Parliament. Until the law is changed they cannot. However, they certainly could do more to alert teachers that this is coming, in particular by making reference to it on the benefit statement. At the moment the emphasis is on the teacher *knowing* that this is happening so that they can then hunt for more information on the TPS website...it is there but you have to look for it.
Hi Dave. Thank you for making these videos. I have found many of them helpful. I usually consider myself a reasonably intelligent person until I try to work out pensions !! I retired aged 60 in 2017 on the final salary scheme. I continued part-time (.4), under the career average scheme, and will continue to do so until SPA in June 2023. My d.o.b is 27.6.57 and I have been teaching since 1979. Does the McCloud judgement apply to me ? Many thanks for your time.
It does apply to you but is likely to be irrelevant. You will be given a choice for the period 1 April 2015 to when you took your retirement in 2017 to either keep it as you had it (that is all of it in the final salary scheme) or for that period to be put into the career average scheme. It is VERY unlikely that the latter would produce a better pension which is why I suggest it is likely to be irrelevant.
Im 60 in Sept 2023 with 34 years service. Im planning to take my pension just before i am 60, take a month out (as required by my LA) and then return to same job full time for another year. This means I can get my pension and earn my original full salary for another year (paying for 3 kids at uni!). My current statement says a pension of 28255 in sept 23 with 84k lump sum, and career av @67 of 4894. With Mcloud spreadsheet formula its another 2464 pension and 7394 lump sum. this is based on my career av date being 31/8/2019 and my salary of 76232. Does that sound about right and is going a month early before 60 so that I can return for a year a good idea financially? ie pension plus salary.
Certainly, if you are intending to carry on working full time then taking the pension before you reach 60 removes all question of abatement and is therefore, on your figures, likely to see you add over £30,000 to your bank account by the end of the next academic year. I presume you are taking August out of contract in order to achieve this. Taking the pension on the day in August that matches your September birth day will result in you being considered as 59+11 months...take it any day before then in August and you lose another whole month and would be considered as 59+10 months. Taking August out makes most sense, losing one month's pay to gain £30k+ is a no-brainer! Also, it means upon your return, on 1 September you can re-join the TPS and so long as you work through to 31 August the next year you will have qualified for more pension from those contributions. You have to work at least 1 year to qualify for additional pension when you return to work after claiming it. With the extra income I strongly suspect you will be in the higher income tax bracket and so it is worth noting that, as well as paying into your new teachers pension, you can also pay into a private pension. Starting your teachers pension does not trigger a reduction in how much you can pay into other pension schemes, so you can pay into the pension schemes 100% of your salary, up to the maximum of £40,000 and get tax relief on it.
Thank you SO much for taking time to reply so quickly. My LA insists we take a month off before returning. As Im 60 on Sept 24 I think ill have to take pension on aug 24 and return to school on sept 24. My governors will go with this as we have a precedent. Does that sound right date -wise??! Im gonna donate a £100 to my local hospice - St Barnabas in Worthing, by way of a thanks to you for all your hard work. Cheers Dave on behalf of teachers everywhere😊
I would say you would end your contract on 31 July so that you are out of contract for the entire month of August. Apply for your pension to start on August 24, whilst you are "out of contract" and then you are free to start work again on 1 September. And, thank you for your kind donation to the hospice. They do sterling work and our local one was fantastic in helping my wife's parents.
@@dfountain Hi Dave. So, I have applied for early retirement at 59 and 11 months starting on Aug 24th this year. I will then go back to work a month later. I rang to TP check I'd completed the form to take both FS and CA at the same time. they were incredible unhelpful and confusing!!) They have given me a figure for both pensions at 59+11mths which is similar to the benefit statement total and a lump sum total. I think he said that if you go early you have to take both pensions at the same time. They really didnt want to say much about the Mcloud thing accept that they would contact eligible teachers in October 23 with 'their choice'. I couldn't elicit what this choice was though!!. So, my 2 pensions taken together (presumbaly from Aug 23) seem to be the same as your spreadsheet boxes in the Early Retirement Option. My lump sum comes out at 93k as per the benefit statement. I understood fom the spreadsheet that the lump sum would also change ( to 112k) but he said there would be no difference from October??. I couldnt actually elicit from him what the choice was that had to be made in October 23?? I guess what Im asking is what will be the choice offered to me as it seems Ive already got both FS and CA pension and will there actually be that furtherlump sum coming??
Yes, 59+11 will not make very much difference (0.2%) to the final salary figures as shown on your statement. You will have a mixture of FS and CA and that will be made up "pre-McCloud", that is; Final salary from when you started to 31 March 2015 Career average from 1 April 2015 onwards. They CANNOT give you the choice you are entitled to under McCloud until after October 2023 because the new regulations that govern HOW that is going to be done aren't going to be in place until 1 October 2023. At that point they will start contacting you and letting you know what the alternative option would be...that alternative being where you would take the 7 year "remedy period" from 1 April 2015 to 31 March 2022 and put it back into the final salary scheme. If you choose to do that then the lump sum MUST change because you are moving up to 7 years into a scheme where the lump sum is automatically based on the number of years multiplied by the "final salary".
Many thanks for this, just wondering how this applies to deferred members? I was FT and went PT and saw my benefits slipping away so came out of the scheme. I am also wondering on your spreadsheet is the PT/FT drop down at the time of the best salary date? I hope you can help.
Interestingly if you opted out because of the change to the career average scheme there is a mention in the legislation regarding your situation. The law is being written so you could restore your membership but subject to paying the missing contributions - now whether that is worth it or not will need some careful calculations. You may need to look at the hypothetical calculation as well in that consideration. The calculator is only rough one, the part-time rate is for the entire 2015-2022 period so if you have chopped and changed it won't be that accurate. You may want to contact me through my website dfountain.co.uk to look over some of this more closely.
I CANNOT begin to tell you how helpful Dave Fountain has been for me. What an asset to the profession. Thank you!
Happy to help!
This is invaluable information as I approach taking early retirement at age 55 - finally someone who makes this understandable and gives us a tool we can use to make informed decisions. Thank you, thank you, thank you!
Glad you found it useful. The sheet is a year old now so may need some tweaking to get an up-to-date comparison.
Having worked in Financial Services (for more years than I care to admit!), before retraining to teach, I consider myself financially adept. As I approach retirement and focus more acutely on my pension options, I realise how little in fact that I do know!! Thank you for so much for sharing your specialist knowledge of the TPS and the relevant legislation that relates to it. How refreshing it is to have impartial information without being pushed (metaphorically) down the road of expensive 'independent' advice.
Yes, so long as you understand that I am NOT a financial adviser so these are my opinions and explanations of what I believe to be relevant to most teachers. I actually would always recommend that independent financial advice should be taken when talking about these kind of figures and that once you are committed to a course of action it can be for the rest of your life.
One financial piece of advice I did hear on this subject was..."So, you think independent financial advice is expensive...what until you find out how expensive NOT getting proper advice is".
However, that said, one of my aims for these series of explanations is to give teachers the knowledge so that they can ask the "right" questions of their advisers.
Absolutely brilliant - so informative and clear. Many, many thanks David!
I was searching about the McCloud Judgement to find out about how it affects my teachers pension - that thankfully brought me to your video here, and more thankfully to your channel of excellent well explained videos on different aspects to consider and plan for in relation to one's pension. I very much appreciate what you're sharing on your channel, it's so helpful when looking at one's pension and planning for retirement, thank you.
Thank you for your appreciation.
Thank you for the very clear explanation David, it's really helped.
Hi David, you’re a hero and so helpful.
Many thanks for not only this excellent explanation, but for the time you took to guide me through my own circumstances. It is appreciated.
Thanks for this Sean. Always glad to help teachers who want a hand, or even a third pair of eyes, look over their individual circumstances.
Straight forward talking on a complex subject, Thank you so much David!
Excellent information about theMcCloud judgement. Well explained. Will be giving the spreadsheet a try! Than you.
Brilliant- thanks David
Great video. Really appreciate it David.
Thank you, much appreciated.
Glad it helped
@@dfountain Just wonder if someone who stops teaching a year before the final salary pension matures would be better off not taking the pension until 60? We could survive a year without the income. Thanks, Hugh
Ahh...yes...this hinges on what defines "better off".
I go into the maths in this video:
ua-cam.com/video/IJZOzhl3FH8/v-deo.html
There is also this sheet that will let you see the effect of taking the pension(s) early: docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing
On the above sheet there are several tabs and if you look just at the one related to the final salary pension it does have what I call the "break-even" age...personally I would consider taking it at 59+11 months since you would have to live well into your 90s to make waiting that extra month worth it!
Another thing to bear in mind (other than the fact that I am not a financial adviser) is that you could get access to other pension pots between 59 and 60 and use those to fund the gap. The primary advantage the the TP has over other schemes is its index-linking whereas most private schemes are reliant on market forces, or buying annuities that often have more restricted index liinking.
@@dfountain Thank you very much indeed David for your advice, we are so grateful. You are a star. Incidentally, I have discovered that you can make extra contributions to the state pension scheme once you have retired, up until the start of the year of your state pension age, this enhances your state pension and the contributions are paid off after a handful of years. Have a fabulous 2023. Hugh
@@dfountain PS. What would you do with the remaining accumulated average pension (after March 2022)? It will be very small since she is part time.
Thanks so much -really clear and helpful !
Glad it was helpful!
I heard about all of this for the first time today having just received an email about it from the TPA! I have been living outside of the UK since 2003 and knew nothing about any of this. I retired last May on my 60th birthday. Because I was born before April 1962, I was never transferred to the CAS and I was paid my lump sum when I retired. How do I stand now? Will these changes affect me at all? Thanks for the excellent presentation and for taking the time to educate teachers about these important issues. I feel that they should not be allowed to change the scheme once you start the job. It's like moving the goal posts in the middle of the game. In the US, which is where I taught after leaving the UK, they introduced new tiers to the pension scheme that only affected new hires. Of course, each new tier was worse than the last, but the benefits of those already in service were protected with each change.
Makes no difference to you. It only applies to service between 1 April 2015 and 31 March 2022.
Thanks so much for your work and sensible presentations. Does the inflation factor change the payouts on the McLoud this year as the last reference on the sheet was 2021. I'm just wondering whether we will benefit this year from the high interest rate or is the pension not liked as easily as this? Once a again thanks!!
Inflation gets added to both career average and final salary pension figures. If you are still working then the career average amount gets an extra 1.6% as well.
The sheet is a reasonably sensible way to look at which scheme was best at the end of the final salary scheme in 2022, going on beyond then both of the McCloud options will have more career average pension added to them but that should be roughly the same increase for each option.
Thank you Dave. @@dfountain
Hi David - this is very useful indeed, thank you - one question, you say those born after 1965 go onto career average but your graph shows Sept 1965? is that just as an example? As the date given on the graph for 1962 is April and you mention after April 62?
Yes, for those who were in the NPA60 final salary scheme the date they were, illegally, moved to the career average scheme depended in their date of birth
Those born before April 1962 were ,moved on 1 April 2022 (after they reached 60).
Those born after September 1965 were moved on 1 April 2015
Those born between these two dates would have been moved at some point between April 2015 and April 2022. They were known as the "tapered" members because the date was a sliding scale, represented by the slope in the graphic at 6:40
Got it, thanks...!;) So still really need to work out what to do as I'm a tapered...
@@cristinafenn3548 Your new "rollback" statemet has one of the two options you will be given, that of having 2015-2022 all in the final salary scheme...for most teachers this is likely to be the best option, but you won't have to choose until you take the pension!
@@dfountain Ahh you are wonderful! You've answered what was my next question before I got to ask it! Thank you so much. I had checked the TP and in fact that is just what had happened;) Thanks so much again;)
@@dfountain Are you also on fb btw? Bit confused about a couple of things..
Brilliant advice here. Thank you. One question, your really helpful spreadsheet does it not need to take account of the number of years of contributions in order to be more accurate? Or does it calculate a rough pension based on the total as stated on the benefit statement?
It could be refined to put in the exact dates but in order to keep it simple and because the only period that gets altered is the 7 year stretch from 1 April 2015 to 31 March 2022 I have just asked for a part-time rate. The part-time rate you enter in B16 can reflect whether those years were full time (in which case it is "7 years" that is used) or whatever part-time rate you were on.
@@dfountain Thank you very much. If one was full time but did not contribute for a two year period due to being abroad (2007-2009) , would the calculator still be reasonably accurate?
Yes...the two year period you mention is outside the McCloud period of 1 April 2012 to 31 March 2015 and so the figures in the statement already account for it.
HOWEVER, your statement will NOT include the pension based on the "hypothetical calculation" that will arise from the break in 2007. This calculation uses your salaries from 1997 to 2007 and as those were a peak in teaching salaries measured against the cost of living it could produce a better pension than shown on your statement. I recommend you look at this video: ua-cam.com/video/sFGJbmtMQHQ/v-deo.html
13:36 thank you for this video. I was born May 1962. I moved to Scotland to teach in 2015. I was out on CARE. I didn’t transfer my English TP over. Having watched your video I’m worried I made a terrible mistake in not bringing over my pension. I did have a break before starting in Scotland as I needed to find a job. Can you advise at all?
Bear in mind that I am only an ex-teacher and not a financial adviser.
This is a particularly difficult one to consider and I don't know how it will be handled. Not transferring your TPS to the Scottish system could well have been a decision that you made at the time BECAUSE of the changes to the final salary scheme and as such you could argue was a contingent decision on the illegal handling of the transition. Problem is that I don't think this is actually covered in the legislation that has been written to remedy this. If you reached a peak in your salary before you moved to Scotland then the damage will be minimal, but if you have moved higher since then I suspect you would have been better off making the transfer. Problem is, as ever, is that these decisions have to be taken at the time and will never measure up to what could have been achieved if you could see into the future!
Sorry that isn't really much help at all.
Thank you. this has been really useful
Glad it was helpful!
Thank you so much for your detailed explanation. If you don't mind me asking, how is it that you lost out on over £2000 a year? I'm currently beginning to look at my options, and I want to make the right choices.
It was more a missed opportunity than a loss. If I had known about the protections surrounding breaks in service I would have been able to lock in a top salary and have the benefit of it 15 years later - I explain this rule here: ua-cam.com/video/qP5XkqTM1f8/v-deo.html
Hi David, thank you so much for putting this together. Could I ask you one question please? Like many teachers my best 3 years were some time ago. I briefly left the pension scheme which meant that my highest earning years were used for the final salary calculation. If the remedy now goes up to October 2022, which years will be used for the new calculation?
You are looking at a situation where different sets of "10" years are used, and then compared at which point you will get whichever produces the best pension.
You want to look at what is called the "hypothetical calculation", I explain about that here: ua-cam.com/video/sFGJbmtMQHQ/v-deo.html
What is crucial in your situations is that the final salary you had in the 10 years prior to the break needs to be LOWER than the final salary you have when you do, finally, leave teaching. This sounds counter-intuitive since you would think a lower salary would produce a lower pension but this is counteracted, quite often overwhelmingly so, by inflation.
The difficulty in answering your question is one where I would be more comfortable being able to look at your statement and put it into real £ and pence for you because the answer has a number of conditional dependencies.
Firstly, the "years" are used in two ways in the calculation of the final salary pension.
There is the "final salary" figure - this uses the 10 years prior to any break from the scheme but ALSO the 10 years up to the end of the scheme...and so long as you haven't had a break of more than 5 years, this can include future years even though everyone moved to the career average scheme on 1 April 2022.
Then there is the number of years "service", and this is where the remedy following the McCloud judgement can make a difference.
You have your service pre-1 April 2015 that will always be counted as "service" for the final salary pension but there are also these 7 years from 1 April 2015 to 31 March 2022 that you are going to be able to choose whether they get included in the final salary scheme or the career average scheme. We then have this interaction with the hypothetical calculation that just adds another layer of complexity. If your final "final salary" is lower than it was at the time of the break then the years AFTER the break do NOT get included in the hypothetical calculation that is made to the time of the break, but if your final "final salary" is higher then those years DO get used in that hypothetical calculation.
If you have read all that I think you can see why it would be best to see someone who understands this stuff and have them go through your full service history with you.
Brilliant video - thank you!
Glad it was helpful!
What a minefield! I am 59 (60 in November)and been teaching since Sept 2008 and therefore going to be affected by the McCloud judgement. My issue is I am going to 0.7 from September. I do not really know what the best thing to do is.
Hi John and yes it can be tricky. If you want to get in touch through my blog, dfountain.co.uk, I can go through the numbers and options with you if you'd like.
As you started in Sep 2008 you are in the final salary 60ths scheme that has a normal pension age of 65.
You also have the option to take phased retirement since your salary is dropping by more than 20%. Leaving your NPA65 final salary until later does mean it will get a lower reduction for being taken early but if you've been at the top of the pay scale for 10+ years then you should really check what is happening with your best "final salary" as it is quite likely that is actually going DOWN.
Hi David, I have watched this video again and used the spreadsheet. I know the calculations provide an estimate but I was trying to understand now that 31st March 22 date has passed, and you produced the video and spreadsheet some time ago, and all new contributions are now accumulating in the career average from the 1st April 23. Would it be best to use a pension forecast from the 31st March 22 and then just add on the career average calculation since that date as it can't be converted to a final salary amount to get the best estimate calculation? I appreciate your good work with your informative videos.
Yes, that would probably be the best method - using the March 2022 statement. Then the amount that gets added will be, roughly, 1/57th of your annual salary since then.
thanks for this! really helpful :)
Glad it was helpful!
Thanks to the firefighters fbu .
For winning this for us all.
Yes, McCloud and Sargeant were the Judge and Firefighter who were used by their unions to push this all the way to the highest courts and won the judgement. That and, indirectly, all the union members across most of the public sector who took strike action in the first place when their pensions were threatened that forced the Government to make the concession that did turn out to be illegal.
Great video. Thank you. I started paying into the TP in 2004, so I believe in eligible for the final salary pension, retiring at 60. I have a further 14 years until I reach 60. In total this would give me 28 years (full time) of pension. Am I correct in thinking I am still eligible for the final salary scheme and that I can choose whether to stick with the final salary or move to career average scheme (whichever is better for me)? Thanks
Afraid not.
The final salary scheme can only include the "years" of service up to 31 March 2022.
The McCloud judgement determined that it was the WAY in which teachers were moved to the career average scheme that was illegal. The scheme itself is legal and so every teacher, from 1 April 2022 must be in the career average scheme.
As you started in 2004, therefore, the most amount of "years" that you can have in the final salary scheme will be 19 (probably a bit less as I suspect you didn't start until September 2004.
You are going to be allowed to choose your changeover date from final salary to career average as EITHER 1 April 2015 or 1 April 2022. Some time in the next 18 months the statement on the TPS website will start to show you, side-by-side, the value of each of these dates for the two schemes.
could you make a version of the sheet that does project forward? I would very much appreciate this if you can
I do have one, it's just a little more complex than my others so I tend to only use it when I can see someone's statement to check for other issues as well...but if you want a go, it is here: docs.google.com/spreadsheets/d/1qQStpIF5Djsl31_IWJ_73oB9r-XJwZXvdf9qoY3gWPY/edit?usp=sharing
Hi David,
Would you be able to give me an idea of what my pension will pay out if I retire at different ages? It's complicated as I didn't begin teaching until I was 31, and have just started, age 44, doing faster accrual at 1/45th. I teach English so numbers and calculations are not my strong point! Thanks.
Yes, make a copy of this sheet to enter your own figures: docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing
I also suggest you look at my comparison in the value between paying for "faster accrual" and buying "additional pension": ua-cam.com/video/rHuqGnfhivM/v-deo.html
where do you get the Inflation Multiplier figures from if I want to update the sheet? thanks
The Government publish them each January to apply to the following year.
The 2022 tables are here: www.gov.uk/government/publications/public-service-pensions-increase-2022
In essence, unless they change the law, this year will see the increase from April 2022 to April 2023 be 10.1%.
The intervening months will be 1/12th of 10.1% for each month.
When we were moved into the career average pension in 2015 I opted to buy out two years so I could retire at 65. The letter about this mentioned I will get a choice now as that but out does not apply to the final salary scheme but I have not seen a good explanation of what that choice will be or when I will be asked to make it. Do you have any idea?
Yes, the legislation and the new regulations tell us WHAT has to happen but we are just waiting for the detail of exactly how MUCH you will get.
You are going to be given some choices, the one that I believe will be the most popular will be where all the money you have paid to the scheme for any "extra" bits, such as Buy Out, will be taken as buying "additional pension" in the final salary scheme instead. So, if you paid £100 a month for the Buy Out they will work out how much Additional Pension that would have bought instead and offer that to you.
The other choice is to take a refund of your contributions but as this will have income tax deducted from it I suspect it won't be as valuable as taking the option to convert your CA "extra" to the FS "extra".
Thank you that is helpful. I was hoping for a letter saying here is lots of your money back, as, cost of living etc.@@dfountain
Question, which I hope you can help with: I had a break in pensionable service from 1/1/14 to 31/8/15. I was on 1/80 scheme up to that point. I was born in 1966. I have been back in pensionable service since 1/9/15 on 1/57 scheme. Do I qualify for the choice of converting or not? Many thanks.
Yes, you are eligible. Only a break of more than 5 years removes a teacher's eligibility.
If your break was one where you "opted out" rather than being where you were not employed, you are also going to be able to reverse that decision and, upon paying the missing contributions, have the service reinstated. Be careful though, it may be that being out of the scheme at that time could produce a much better final salary pension via the "hypothetical calculation".
@@dfountain Good to have this confirmed. Thank you for your time- and the videos.
Have you picked up any vibes about how the knock on effects of a decision to change will be handled? E.g. backdated changes to income tax already paid in previous years, interest paid (or owed) on amended lump sums and so on.
I'm in the similar Civil Service pension scheme, and my initial thought is that a change from FS to CA would mean that I would need to repay part of my non-taxable lump sum, and instead would receive a slightly higher taxable pension (dating back to June 2015 in my case). My numbers won't be huge since I only worked 61 days after April 1st 2015 before collecting a actuarially reduced FS pension but will be much higher for people who worked on until 2022. Just wondering who would administer the change (the pension provider or HMRC) and so on.
Most of the stuff is in the legislation "Public Service Pensions and Judicial Offices Act 2022" and I think we can fill in a few gaps from the way the existing schemes handle "late" payments.
INCOME TAX
The legislation as it stands states that backdated payments will be made as soon as they are processed in that tax year and be taken as being paid in that tax year. So, the payments do not automatically get set against the previous years in which they were supposed to be paid. This could lead to more income tax being deducted if these additional amounts pushed someone into a higher tax bracket. However, the legislation also states that individuals are going to be able to make a claim, to HMRC, if this is the case to have their overpayments of such tax to be cancelled if they can show they wouldn't have paid tax at that level if they'd been paid in the previous years. To be honest this is probably only going to affect a small proportion of pension payments. This is because those who have been in receipt of pensions for the longest time, like yourself, won't have many years in the career average scheme and so the differentials will be small. Those with the full 7 years in the CA scheme will only have been retired for a short period by the time they get the options sorted and so will have less of a backdated period to cover.
LUMP SUM
The lump sum itself is non-taxable anyway, so it is only on the differences in the annual pension. The difference in the FS pension and the CA pension isn't, in most cases, that significant. You suggest you might have to repay some of your lump sum if you went for the CA option but this won't be the case because your pension was based on you being in the CA option anyway. You would only get a lower lump sum if you were moving service you had in the FS scheme TO the CA one. There is a small group for whom this might happen, that is those who were tapered members who did not transition on 1 April 2015 but at a later date. Almost all of the calculations I have done thus far show very minor increases in the annual pension when compared to the effect on the lump sum and so I don't think many would make that choice.
INTEREST
The legislation says that "interest" must be paid, and charged, on late payments or repayments but doesn't specify what rate this will be at. Taking the current scheme regulations as the basis for this we can see that in those regulations the interest rate is set at the Bank of England's base rate, so I expect that will be what is used.
@@dfountain Many thanks for the helpful & detailed reply.
Thank you for your very helpful videos. I took early retirement March 2021 at 57 with 35 years service. Could you make clear how the transitional protection process (McCloud remedy) for those who retired. Will I get a choice for those years of service when I was illegally moved from final salary in the same way as those in service? Because I took my pension early, does that affect the remedy? Thank you
Yes, you will get exactly the same choices as those who have not yet retired.
I think you may be a tapered member so the two choices will be different to what you have now. You can choose to have 1 April 2015 to when you left in either the career average scheme or in the final salary scheme.
Having taking the pension makes no difference to the remedy options, though if you decided to "sell" some of your pension to get a larger lump sum you might want to look again at that decision.
Thank you very much. Yes, I am a tapered member. I have looked at the case studies on the Teachers' Pension site, and with your excellent points about "comparing apples with apples," I feel far more confident about the choice to make in October. I did not sell some of my pension to get a bigger lump sum. I liked your video on whether you really lose 20% by taking your pension early. Keep up the excellent work. @@dfountain
Hi David I had a break in service between 1/10/2014 and 6/04/215 when I started my new teaching job I was put straight onto the career average scheme having previously been on final salary scheme since the late 1990’s
Would this break in service result in my not be eligible for the McCloud judgment? Thanks for any thoughts on this matter
Gina
No it does not affect your eligibility, only a break of more than 5 years can do that. Your break of 7 months is not a problem.
All teachers born before October 2015 started the Career Average pension on 1 April 2015, so this isn't a problem for you. So long as you were also in the TPS before 1 April 2012 then you are eligible under the McCloud judgement.
HI Dave, could you post the link to your spreadsheet please
Yes, it's in the description: docs.google.com/spreadsheets/d/1aKYA2cPirQjKje6KGU54jNo5R6o0dtyNp0wuGZn_pfU/edit?usp=sharing
Hi David. Thank you for the excellent videos. Can I clarify - If you are born before 1962, are you able to stay on final salary arrangement after the McCloud Judgement case in 2022? Thank you-Alastair
That is not one I am absolutely certain about. My understanding is that you have full protection only up to 1st April 2022 at which point only the Career Average scheme will be in effect. I will have a look through the proposed legislation again to check.
@@dfountain Thank you.
@@dfountain Hi David, so basically, we are all going to the 'career average' scheme after April 2022 and so I presume TP will re-calculate our pensions? Thanks again for your reply and videos. Alastair
I found an answer on the TPS website that confirms that from 1 April 2022 the only scheme in operation will be the Career Average scheme.
In this case I strongly suggest anyone in that position considers whether they need to opt out for a month (March or April 2022) to protect their final salary pension. This is because they will no longer be adding 'service' to that calculation and as we have had over a decade of below inflation pay rises and a proposed pay freeze coming, the "final salary" that is going to be used in working out their pension is very likely to be falling due to the way it is calculated using inflation adjusted salaries from the last 10 years.
@@dfountain Thank you very much David. Yes, just started to scour the TP website and there is some useful information about all this. Yes, we all go over to Career Average Scheme 1 April 2022. TP say just to wait for any further news on this bit.
Hi David. Will you be offering any advice re people who have made decisions regarding their pensions before the age discrimination was proven? I believe that there will be an opportunity for these people to perhaps seek compensation after October 2023.
Bear in mind that I am not a financial adviser so I limit myself to explaining aspects of the scheme rather than trying to tell anyone what to do. Getting the facts so you can make an informed decision is key of course.
The remedy legislation (Public Service Pensions and Judicial Offices Act 2022) provides for only one decision taken at the time to be rectified. That being where a member chose to opt out because they didn't want to be in the career average scheme. The scheme MUST make provision to allow the member to reverse their decision and restore their opted out service through this part of the Act:
5 Election for retrospective provision to apply to opted-out service
(1) Scheme regulations for a Chapter 1 legacy scheme must make provision so as to secure that an election may be made in relation to relevant opted-out service in an employment or office.
HOWEVER...if they choose to do this then they will be asked to pay the contributions that they would have paid at the time.
At the moment it is not clear if they will be allowed to pick and choose which parts of their opted out service should be restored of if it will be an all-or-nothing option. There is NO provision to allow members to go the other way either, they are not going to be allowed to retrospectively opt-out of the period.
I will be looking at this closer once the secondary legislation has been made clear, not least because members are only going to be allowed to reverse their opted out period within 12 months of being told what the changes mean to them. There is also a significant possibility that opting back in could make their pensions worse due to the fact that teachers have had over a decade of below inflation pay awards or pay freezes.
@@dfountain Thanks for that. I was wondering whether there would be any provision for people who had retired earlier than they might have because they had been moved into a less generous pension scheme and felt it wasn’t worth it given the later retirement age and the extra money they would lose going early in the 2015 scheme compared to the final salary one. Also people who had taken a step back from a higher paid post to do a lesser paid post because the final salary element no longer applied. (Both these situations apply to me!)
I think these are outside the scope of the remedy legislation and would require you to undertake independent legal action. There may be some legal firms who are pursuing such cases.
The issue of the final salary one though is something I think you have been misinformed about. The salaries, even after the end of the final salary scheme itself, continue to be used in the calculation of that part of the pension. Anyone still working who was previously in the final salary scheme, unless they have a break of more than 5 years, will still have their final salary figure based on their final 10 years. If they were to work on until 2050 then the 10 years being used in the calculation of their final salary would be 2040 to 2050. (This is referred to in the TPS documentation as the "Final Salary Link")
Hi David, thanks for the clear information. Although it doesn't seem to match my situation.
As I started teaching in July 2012, your video states that I should have been placed straight onto the Career average scheme. My TPS employment history states that I went onto the Final Salary 60th scheme until April 2015, at which point I was moved onto the Career Average scheme.
I spoke with TPS, who said that according to their system I'm not marked as someone affected by the McCloud judgement, but the operative (who admitted to being new to the job) couldn't clarify why not.
I'd be interested to know your thoughts on this.
That sounds correct. (and so yes, sorry - I hurried through that bit and messed up...the period up to 1 April 2015 is the final salary scheme and the career average scheme didn't start for anyone until then)
The cut off date for McCloud eligibility is 31 March 2012. You started after that date and so are not affected by the McCloud judgement and won't be given the choice as to which scheme your 2012-2022 service is in.
This is the nuance of the age discrimination case.
ANYONE, no matter what their age (hence no age discrimination) who started in the TPS after 31 March 2012 was put in the Final Salary 60ths scheme that has a normal pension age of 65 and they all, again with no reference to their age, on 1 April 2015 started in the Career Average scheme.
Hi David. Thank you for your easy to follow video it was really useful! It’s so kind of you to make it your mission to help others 😊 I am in a similar boat to the above person. I started teaching in 2013 so have been put on the final salary 60th scheme?! Until April 2015 where it changed to CA. I was born in 1975. Does that mean i remain unaffected? Will I get the choice to change or will it remain the same with two retirement ages? (As you’ve probably picked up ….. I’m ready to retire asap!) Thank you.
Hello Dave. I have received contradictory advice from the people at teachers pensions. I retired last year after thirty years service.
One of the advisors said all teachers who have already retired would benefit after they had chosen from the two options presented to them.
The other said only a small percentage would actually receive any additional money and even then it would be minimal.
Can you shed any light on this?
Thanks
Sure, but only by doing the maths with each person, as it does depend heavily on their last 10 year's salary profile (or any previous breaks in service's 10 year history). Suffice to say the lump sum difference alone for you is likely to hit, or get close to, 5 figures.
There really isn't any need to 'guess' at this - the calculation isn't too difficult so long as you have your most recent statement, I have a "rough" conversion calculator here: docs.google.com/spreadsheets/d/1aKYA2cPirQjKje6KGU54jNo5R6o0dtyNp0wuGZn_pfU/edit?usp=sharing
I did get very irritated with the "case studies" that TPS put on their website as they have heavily weighted the profiles to favour the career average option (i.e. teachers on the NPA60 scheme working to 65! This profile gives no benefit to the NPA60 final salary scheme because, unlike the reduction you get for taking it early, there is no corresponding enhancement for taking it 'late' and favours the career average option as the reduction applied to it is far less than if the person had left at 60). So, I made some of my own - examples on my blog dfountain.co.uk
Now, I've done probably hundreds of these calculations with teachers to come up with the McCloud choices and the vast majority are going to be better off in the final salary scheme for the period 1 April 2015 to 31 March 2022, especially if they were in the earlier NPA60 scheme (pre-2007 starters).
In most cases they are getting a small increase in the annual pension but a massive increase in the lump sum - often reaching a 5-figure difference. These cases make an easy choice for the teacher of course. There are a fair number for whom the annual pension under the career average choice is slightly better but, in the vast majority of those cases, the lump sum is far worse and easily outweighs the pension difference. However, each person will need to make that choice.
Under all circumstances the final salary scheme does give a larger lump sum for the earlier NPA60 final salary scheme. For each year you were in the transition period it will be 3/80ths of the final salary MORE. So, if you were in the transition for the maximum of 7 years that equates to 21/80ths of your final salary more than you'd get if you took the career average option...or for a standard classroom teacher finishing on around £40,000 than is a difference in the lump sum of about £10,500
@@dfountain - Thanks for your reply Dave. I might be able to put the heating on now!
Hello David, I wonder if you would be able to help me get some idea of what my final pension could be with or without the use if the remedy period? I am super struggling with my vision so have had to retire early. I am having trouble with the cells putting in the figures. If you were ale to help what information would you need from me?
Of course, get in touch directly and I'll go through it. dave@dfountain.co.uk
@@dfountain thank you so much I have emailed you.
@@dfountain Hello David, can you confirm that you received the document that I sent to you. With the issue of my vision there is a reasonable chqnce I may have sent it to somebody else. Really appreciate your support with all of this. Regards, Steve
Yes
Hi David.. after watching one of your videos I looked a the table of revalued averages relating to my last 10 years. I discovered that from this month my best 3 years average with method B starts to go down. If I opt out for a month (or less?) I know that I will lose the employers contribution for that month. Will I have any difficulty in re-enrolling in the scheme and will the employers contribution remain the same following my short break? Thank you for your very informative videos.
This applies to the TPS in England and Wales...Scotland doesn't operate the same 'hypothetical calculation' protection (just mention it considering the McC in your name). NI I think, but not had it confirmed by them, also doesn't.
That said, then opting back in is a simple online form in the same way that opting out. I'd probably alert your payroll to what is happening and why just so they can be prepared (and it forms an email trail should any problems arise!).
Any break of under 5 years results in you going back in to the scheme as though you'd never left, except missing a month's contributions etc - everyone is in the career average now anyway. To work out how much you are sacrificing from the CA scheme simply divide your gross monthly pay by 57. For example, top of the upper pay range is £41,604 per year. Per month that is £3,467. 1/57th of that is £60.82. So, taking a month out of the TPS for this person would mean they don't add ~£61 to the annual CA pension (that value based on taking the pension at their state pension age).
@@dfountain thanks David. A crazy question perhaps.. is it possible to opt out for less than a month and still have the desired effect.
No "opting" is for whole months only. If, on the other hand, you leave one post and get another a few days later then you will also have a break which will qualify for the hypothetical calculation. For example, finish at one school on 5 April and start at a new one on 7 April - however teachers' contracts are generally for whole terms so it would need a special arrangement with the schools.
Thanks very much. Very useful. I have retired and was under the final pension scheme which was easy to work out. I am trying to workout my wife’s who will be under the Mcloud judgement. She has worked already then from 2022 in April on the career average scheme. She will probably then retire at either 55, 56 or 57. Clearly early! Is their a calculation I can do for all these factors please. That is the normal pension age bit, the Mcloud bit and then the career average bit. Thanks.
Yes, it is possible and as she's under 55 it's not too difficult because one of the options, having April 2015 to March 2022 in the career average scheme is ON her benefit statement.
The alternative option, where April 2015 to March 2022 is put back into the final salary scheme is only a little trickier.
If she was full time in that period it's a straight forward 7 years extra. So, look at what is shown on the final salary pension. Divide it by the years of service that is shown on the statement and then multiply it by 7. Add that to the final salary pension.
That adjusts the pension up to 31 March 2022. Then for the period after that she will be in the career average scheme. For that simply divide her annual salary by 57 to get what is added in a year and then divide that by 12 to see how much she will be adding to the CA part every month.
Hi David, asking fir a colleague. He’s 50. In 2012 he was a deputy head. Had to go back as a main scale teacher for the last 9 years! He thinks that he will be able to use that salary to calculate his 1/80 pension as it will be protected under the mccloud judgement. I’m not sure it will. I believe that it will be only the best 3 years from the final 10 years he works. Any ideas?
Afraid I agree with you. McCloud does nothing to 'freeze' the 10 year period. Unless he has had a break in pensionable service he is stuffed!
If he still has one year being counted in the best 3 then he needs to opt out ASAP for a month. It won't be as good as having all 3 on his DH salary, but better than nothing!
Actually, he should probably get in touch and let me help him see what is going to happen to his final salary over the next few months so he can make a properly informed decision.
@@dfountain as I understood it too. Many thanks as usual.
Hi David - I started teaching in 1995 and have worked full-time since so am impacted by the McCloud judgement. Would it make any difference to my lump sum and pension if I were to get a better paid teaching job now (Sept 2022) or would it make only an incremental difference as it would only impact my average salary component? Many thanks
PS I am 51 and want to know if it is sensible to take a break from the TPS to protect my final salary component as well?
Without seeing your full employment history I cannot be sure. I suggest you look at another video called "The Pay Plateau" where I discuss this.
But generally...
As you have not had a break of more than 5 years then your current and future salaries WILL be used in the calculation of your final salary pension.
Whether a better paid post this September will make a difference does depend on whether the pay is better than your existing final salary. Even if it is better it also depends on how much better it is.
You should check your statement to see what period of time your best final salary is based on at the moment. If it is the last year, or last 3 years, then the increase would have to be significant as inflation running at over 10% means any pay raise of under that figure isn't going to make any improvement - and in fact could result in a lower pension that could be possible. See the video I have done on this year's pay rise: ua-cam.com/video/hUywJcrKIUA/v-deo.html
Thanks David - will take a look at that. And what about people like me taking a break in TPS contributions - is that advisable?
Impossible to say for certain without looking at your full employment history, particularly if you've had any previous breaks.
However, if your current best salary on the statement is shown as method A and your pay increase in September is below inflation then, yes, a month out could produce a better FS pension.
Similarly, if it is Method B and the dates used in that run from 2012 then, again, a month out would secure their use in the future no matter how much longer you worked for.
Hi David - thanks for that my best 3 years are September 2012-August 2015 (Method B) - but barely more than I earn now. Am I safe to assume that my pay in September 2022 onwards (given a pay increase that surely will be coming) will take me over this previous peak and therefore I would not need to take a break from the TPS (eg like you, I reckon my peaks in the 2000s would have been far higher than the ones I have enjoyed more latterly!).
Hi David thanks so much for this information
Is it possible to contact you so I can discuss my personal situation as I am 53 and thinking of retiring early and have a few questions? I have tried to seek a financial advisor but none seem to be interested when I say it’s related to the teachers pension scheme
Thanks Gina
Sure, contact me through my blog - dfountain.co.uk
Just bear in mind that I am *only* an ex-maths teacher and not a financial adviser :)
Fantastic Dave, thank you so much,
I feel that I am in a bit of a situation as I am currently in the NPA 60 scheme and was going to retire at 62+5 months which is August 2023.
Is my understanding correct that I would I still get my Final Salary scheme up until 31st March 21 and then 1 Year & 5 months in the career ave scheme.
1) I don't want to loose my rights to final salary + lump sum
2) is it really worth working for 1 year 5 months to get career average which would be reduced as I would only be 63
I would strongly suggest you get one of the Union associated companies in to go through the numbers with you as you have a wide range of options open to you and your situation is complex with respect to already being over 60 and able to take your pension at any time.
You CANNOT lose your rights to your final salary + lump sum pension between now and August 2023.
However, taking the NPA60 pension at any point will mean that it uses the Final Salary at that point and from then on you would be building a new pension in a new Career Average scheme. And as for your 2nd question, I would say yes - even though the CA scheme is not as good as the FS ones, it is still a worthwhile investment that pays a decent return. You are paying in around 10% and will get back, through the pension at 63, just over 1.4% a year...so by the time you reach 70ish you will have been paid back all the money you paid out.
There are two parts to the FS pension. The FS salary and the length of service.
The FS salary is something you need to look at as it may be going down (more than a decade of pay freezes and below inflation pay rises creates this anomaly).
You have until April 2022 to increase your service.
I would be looking to work out what these two figures would do for your pension each month between now and April 2022.
I suspect that there is no advantage to you delaying taking the NPA60 pension beyond April 2022, even with abatement, unless your pay is likely to increase over inflation between then and August 2023. But do check this with TPS, as I am not certain how they handle such a case. I say this (and remember I have no qualifications in this area) because there is no 'enhancement' for taking the NPA60 pension 'late'. You can take the NPA60 pension at any time once you have reached the age of 60 without needing a break in service - you can simply opt out of the pension scheme for the month in which you claim those benefits...and then opt back in the next month to add to the new CA scheme.
@@dfountain Thank you
I can't seem to download the spreadsheet. Is it still available? I am looking to retire and go back to work this summer. Started working in 1988.
docs.google.com/spreadsheets/d/1aKYA2cPirQjKje6KGU54jNo5R6o0dtyNp0wuGZn_pfU/edit?usp=sharing
This one is still there
@@dfountain Thank you
I can not enter my final salary scheme as 67, also my Date CA Pension Scheme is 2019, not 2015, as you said most people would be.
The final salary schemes do not have a NPA of 67, that is the career average scheme.
There are just two final salary schemes, those who started before 2007 will be in the NPA60, those who started in 2007 or later will be in the NPA65 one.
Sorry; I am not very IT literate. I don't know what a "blog" is; I suspect it is a dreadful abbreviation.
I would be most grateful for your help, but would I need to make my details public? I am unwilling to do that.
Regards: P C Hall
You're right it is short for a web-log, an online journal where the owner can pretend to be important and publish what they consider is vital information. Mine is basically a website where I post links to these videos and my spreadsheets. No registration or disclosure of your data is required.
May I just ask, publicly, one question, please? Given that I have been in receipt of my pension for some years, do I have anything to worry about?
Thank you.
There is a very small mathematical possibility that the two options you will be offered will both be worse than what you have but I have yet to see it for real. If you transitioned to the career average on 1 April 2015 then there is no chance you will be worse off. If you didn't transition to the career average at all then there is no chance you will be worse off. The vast (vast) majority who did move to the CA scheme will be better off.
@@dfountain kay. Thank you for this information. I'm afraid I have no idea about the answers to your questions. Can this be found on the TP website?
I am very reluctant to get TP involved at all. Essentially, I had to ring them two or three times a day, for six months, to get my pension put into payment, and to get my lump sum paid. I thought that was the end of it then, but, apparently not. If you can give me any advice about how to proceed, I would be very grateful.
Thank you.
All you have to do is wait. They have to contact you with the two options. Before you choose they have to tell you how much each option will be worth. They are going to prioritise those, like yourself, who are already receiving a pension but the deadline for them to do this is October 2023 (the law governing this hasn't actually been passed yet so they cannot do anything just yet anyway).
Bear in mind this only affects any service you had after 1 April 2015, so it is not likely to be a large proportion of your pension anyway that is affected.
Your transition date depended on your birthday. There's a list here: www.teacherspensions.co.uk/employers/advising-members/eligibility/~/media/93CC7173567A46B2A3D99E4D242FCEE9.ashx
If your birthday was before April 1962 then your pension has been worked out entirely in the final salary scheme - and is likely to be as good as it could be.
If your birthday was after September 1965 then your pension was worked out using the maximum amount of career average time.
In either of those two cases apply to you then the amount you are getting will be one of the two choices they give you. i.e. you cannot lose unless you choose the worse option!
I am very grateful indeed for your help.
Do I owe you anything for it?
Nothing owed. I subscribe to the "pay it forward" principle - if I can help you then at some point you will help someone else.
Thank you
You're welcome
Thanks, appreciate the explanation.
The TPS seem pretty useless though. No mention of this on their site and when I did a practice r7n of completing the forms there js no mention of a choice.
And when she wrote to ask for an illustration for if she retired a year early, they replied they couldn't because they didn't know what her pension was! (It's there on the TPS site but only for retiring at 60...)
The choice cannot be made yet as the legislation to allow this is currently still passing through Parliament. Until the law is changed they cannot.
However, they certainly could do more to alert teachers that this is coming, in particular by making reference to it on the benefit statement. At the moment the emphasis is on the teacher *knowing* that this is happening so that they can then hunt for more information on the TPS website...it is there but you have to look for it.
Hi Dave. Thank you for making these videos. I have found many of them helpful. I usually consider myself a reasonably intelligent person until I try to work out pensions !!
I retired aged 60 in 2017 on the final salary scheme. I continued part-time (.4), under the career average scheme, and will continue to do so until SPA in June 2023. My d.o.b is 27.6.57 and I have been teaching since 1979. Does the McCloud judgement apply to me ? Many thanks for your time.
It does apply to you but is likely to be irrelevant.
You will be given a choice for the period 1 April 2015 to when you took your retirement in 2017 to either keep it as you had it (that is all of it in the final salary scheme) or for that period to be put into the career average scheme. It is VERY unlikely that the latter would produce a better pension which is why I suggest it is likely to be irrelevant.
Sorry not to reply sooner. Thank you. That's really helpful.
Im 60 in Sept 2023 with 34 years service. Im planning to take my pension just before i am 60, take a month out (as required by my LA) and then return to same job full time for another year. This means I can get my pension and earn my original full salary for another year (paying for 3 kids at uni!). My current statement says a pension of 28255 in sept 23 with 84k lump sum, and career av @67 of 4894.
With Mcloud spreadsheet formula its another 2464 pension and 7394 lump sum. this is based on my career av date being 31/8/2019 and my salary of 76232. Does that sound about right and is going a month early before 60 so that I can return for a year a good idea financially? ie pension plus salary.
Certainly, if you are intending to carry on working full time then taking the pension before you reach 60 removes all question of abatement and is therefore, on your figures, likely to see you add over £30,000 to your bank account by the end of the next academic year.
I presume you are taking August out of contract in order to achieve this. Taking the pension on the day in August that matches your September birth day will result in you being considered as 59+11 months...take it any day before then in August and you lose another whole month and would be considered as 59+10 months. Taking August out makes most sense, losing one month's pay to gain £30k+ is a no-brainer! Also, it means upon your return, on 1 September you can re-join the TPS and so long as you work through to 31 August the next year you will have qualified for more pension from those contributions. You have to work at least 1 year to qualify for additional pension when you return to work after claiming it.
With the extra income I strongly suspect you will be in the higher income tax bracket and so it is worth noting that, as well as paying into your new teachers pension, you can also pay into a private pension. Starting your teachers pension does not trigger a reduction in how much you can pay into other pension schemes, so you can pay into the pension schemes 100% of your salary, up to the maximum of £40,000 and get tax relief on it.
Thank you SO much for taking time to reply so quickly. My LA insists we take a month off before returning. As Im 60 on Sept 24 I think ill have to take pension on aug 24 and return to school on sept 24. My governors will go with this as we have a precedent. Does that sound right date -wise??!
Im gonna donate a £100 to my local hospice - St Barnabas in Worthing, by way of a thanks to you for all your hard work. Cheers Dave on behalf of teachers everywhere😊
I would say you would end your contract on 31 July so that you are out of contract for the entire month of August. Apply for your pension to start on August 24, whilst you are "out of contract" and then you are free to start work again on 1 September.
And, thank you for your kind donation to the hospice. They do sterling work and our local one was fantastic in helping my wife's parents.
@@dfountain Hi Dave. So, I have applied for early retirement at 59 and 11 months starting on Aug 24th this year. I will then go back to work a month later. I rang to TP check I'd completed the form to take both FS and CA at the same time. they were incredible unhelpful and confusing!!) They have given me a figure for both pensions at 59+11mths which is similar to the benefit statement total and a lump sum total. I think he said that if you go early you have to take both pensions at the same time. They really didnt want to say much about the Mcloud thing accept that they would contact eligible teachers in October 23 with 'their choice'. I couldn't elicit what this choice was though!!. So, my 2 pensions taken together (presumbaly from Aug 23) seem to be the same as your spreadsheet boxes in the Early Retirement Option. My lump sum comes out at 93k as per the benefit statement. I understood fom the spreadsheet that the lump sum would also change ( to 112k) but he said there would be no difference from October??. I couldnt actually elicit from him what the choice was that had to be made in October 23?? I guess what Im asking is what will be the choice offered to me as it seems Ive already got both FS and CA pension and will there actually be that furtherlump sum coming??
Yes, 59+11 will not make very much difference (0.2%) to the final salary figures as shown on your statement.
You will have a mixture of FS and CA and that will be made up "pre-McCloud", that is;
Final salary from when you started to 31 March 2015
Career average from 1 April 2015 onwards.
They CANNOT give you the choice you are entitled to under McCloud until after October 2023 because the new regulations that govern HOW that is going to be done aren't going to be in place until 1 October 2023. At that point they will start contacting you and letting you know what the alternative option would be...that alternative being where you would take the 7 year "remedy period" from 1 April 2015 to 31 March 2022 and put it back into the final salary scheme. If you choose to do that then the lump sum MUST change because you are moving up to 7 years into a scheme where the lump sum is automatically based on the number of years multiplied by the "final salary".
Many thanks for this, just wondering how this applies to deferred members? I was FT and went PT and saw my benefits slipping away so came out of the scheme. I am also wondering on your spreadsheet is the PT/FT drop down at the time of the best salary date? I hope you can help.
Interestingly if you opted out because of the change to the career average scheme there is a mention in the legislation regarding your situation. The law is being written so you could restore your membership but subject to paying the missing contributions - now whether that is worth it or not will need some careful calculations. You may need to look at the hypothetical calculation as well in that consideration.
The calculator is only rough one, the part-time rate is for the entire 2015-2022 period so if you have chopped and changed it won't be that accurate.
You may want to contact me through my website dfountain.co.uk to look over some of this more closely.
Yes I will contact you, many thanks. It’s all very confusing
Hello. I have just seen your video. Are you still available to help? Thank you.
Sure, either ask here or through my blog dfountain.co.uk