Thanks David ..this is perfect for me.Mid 50s and at top of ups with zero ambition to go further.I'm preparing for retirement in the next few years and will almost definitely be opting out for a month.i checked on the TPA site and that said that my wages 10 years ago were higher than now when adjusted for inflation.I really appreciate your effort and clarity in your videos.
Thanks for commenting. Just be careful to work out when might be the best time...you can ADD service time right up to 31 March 2022 so I would suggest you need to work out what effect that increase in time together with the fall in final salary means for your pension. After March there isn't the same conundrum because no more time can be added. In the worst/best case I have seen I caught a colleague who had stepped down from a deputy head role just before they started to lose those higher salaries...in their case they were better off opting out for THREE YEARS, otherwise they'd have paid over £10,000 in pension contributions with the end result that their pension would have gone DOWN. The calculation isn't too hard but if you want a hand just give me a should via the website at dfountain.co.uk
On your benefit statement (download the PDF), it has your last 10 years with the actual and revalued salaries. They start on page 3 and go on from there.
Thank you for these videos - much appreciated. Now it's half term, I am finally (at age 57) trying to get my head around the "complicated world of TPS"! My "Method B" dates are 2015 - 2018, which I believe means these are the "peak 3 years" due to inflation adjustment. I have been in three middle leadership roles from 2007 to present, I moved posts in 2014 and then 2017. I am therefore guessing the three year interval in the middle was the "peak". Thanks again for highlighting this - and the need for life insurance cover during the month break. I'll contact the TPS to discuss further....
Yes, that's likely to cover some of the better years, 2008 to 2018. You are also going to be eligible under the McCloud judgement to swap your service back from the current career average to the final salary scheme for the period 1 Apr 2015 to 31 Mar 2022, but this is going to be tricky to work out. When you do come to retire make sure you have examined all the potential options as your break lead to the restricted rather than unrestricted hypothetical calculation.
Thank you for that comment. I always try to steer clear of giving 'advice' as such as that is a heavily regulated area but I can help anyone work out what the different options will give them in £ and pence...as always though this is heavily dependent on what may, or may not, happen in the future. The key point this video is trying to make is that you can tell what the downside is with a high level of certainty - the one month lost from the scheme, particularly in the career average variant, is a known amount - whereas the potential improvement in the final salary portion is entirely dependent on future pay and inflation. Looking back at my career I could see several points in time where I could tell with confidence that I wasn't going to get any more significant pay increases for a while and this advice then would have been useful ;)
Thanks David - really great resource, I've spent the last day going through most of your videos and website. In TPS since 2009, with best salary 2015-2018, so finding this now has been a big help. Top of salary last 8 years, but salary now still lower than 15-18 inflation adjusted figure. Will put in a months break asap. I'm 48 and looking to leave at 57. As I have both final salary (NPA65) and Career Average (NPA67) - would I be able to take both at 55 or 57?
There is some uncertainty in this area. On its OWN the final salary scheme has protected age status allowing it to be taken at 55, but when you also have a career average pension the generally accepted interpretation is that this prevents taking either of them until 57. Personally I would like to see the link that forces this removed, or even challenged in the courts, but nothing has been resolved yet.
Brilliant advice, thanks David. Hope you don’t mind me asking a question. My partner is a teacher and looking at her statement the best 3 consecutive years for the final salary is currently 2013-2016 as she stood up to HT for a year in the that period. The average salary is probably £5k above what she is currently paid. I have said, following on from what I understand from your excellent video, that she should opt out for a month now before the 2013-2016 period disappears from the 10 year look back. Of course I have said she needs to get advice from someone more knowledgeable then me but is my understanding correct? Many thanks in anticipation.
Absolutely. Unless she has had a previous break this would be the most sensible option - but even if she has had a previous break the loss to the CA pension from taking a month out now is quite minimal.
Hi David, if you opt out for a month to lock in your best three years do the years before the break you create continue to rise through index linking or do they remain at the value they were at the time of the break?
For the calculation of the pension to the date of the break they remain the same, but the pension then gets the revaluation through index-linking from the date of the break for that hypothetical calculation - so, in effect, it is the same as if they kept getting increased. For use in the "normal" calculation they continue getting revalued.
Thanks David, your videos are so helpful - much appreciated. My method B best three years were 2014-2017. I am going to take a months break but didn't get my act together to start that on 1st August. Should I just do that as soon as possible (Sept if I can) or is there a particular month this year that is more beneficial? - March or next August for example? If you got the chance to answer this query that would be great.
The best time is before it falls any further, this will happen when you get into the month listed as being the start of your 3 years, most likely September 2014. You have to opt out for a calendar month and this should be taken as the next calendar month after you submit the opt out form. Submit it now, in August, and they should take you out for September but if you waited until 1 September to send in the form then that should take you out of October.
@@dfountain yes, the start of my best three years is Sept 2014 so opting out for the month of Sept is not as good as opting out for the month of August but as the ship has sailed for opting out in August I should just do it ASAP
My goodness, I thought I knew about pensions but obviously not. Not sure how much this impacts me as I have earned my highest salary (£10000 more) in what will be the last three years of my working life. I am 58 and intend retiring either at 59 or going to 60 with approximately 34 years in the scheme. I am under the impression that I will receive final salary scheme of 80ths but will need to check this out. I shall arrange a pension analysis through the union (UCU) as they are usually pretty good. Thank you for highlighting these things as I would not have become aware.
You do need to have someone who understands the scheme look at it very carefully as there are ALSO limits on how much your pay can increase in the final 3 years. With 34 years in you will have transitioned from the final salary scheme to the career average scheme at some point since 2015, probably in the 2020s, however this transition was illegal (see my explanation of the McCloud judgement). You will be able to choose whether your service from 2015 to March 2022 is in the final salary 80ths scheme or in the newer career average scheme. Your service from April 2022 WILL be in the newer career average scheme.
Hi David. Thanks for the videos. A colleague shared this today and having checked TPS I realise I should have done this some time ago. I was a HOD on UPS 3 until Sept 2019 and am now just a UPS 3 class teacher. On TPS it says my 3 best years are Oct 2014-Nov 2017. Does this mean the horse has bolted or would it still be worthwhile to take a month gap ASAP?
Unless you have had a break at some point then you have lost October and November 2014, but acting now will prevent the loss of any more of those remaining best 34 months.
Hi David Thank you so much for your videos they are so so informative. I have a question , my best years in my pension statement are 01/09/2014 - 31/08/2017. Following your really helpful information I intend to take action now to opt out for one month from the TPS to lock in these best years before September 2024. Am I correct in assuming that once I opt back in to the TPS , the years after 31/08/ 2017 - 2022 are still included when calculating my final salary scheme . And the years after 2022 only impact my average salary ?
Yes, those years are still included. Also if you were to go on to a much higher salary in the future that salary can still be used...though it would have to be a pretty good increase given that your 2014-17 figures are probably already around 10% higher than your current salary.
Thank you so much for excellent help here . Hoping opt out doesn’t take too long to process? … as best years on my pension statement start from 01/09/2014.. so needs to be done by September 2024.
Taking a break before April 2022 does mean that you will need to keep an eye on whether you will get the 'restricted' hypothetical calculation rather than the better 'unrestricted' one. After April there is no difference between the two.
If you have since gone back into the scheme then unless you finish on a higher salary (calculated from the last 12 months OR best 3-in-last-10-years) then the months since the break won't be counted in the final salary calculation that is done to that break. (They will be used in the normal end of employment calculation). If you have your statement from the month you took the break it will tell you what that salary figure is. In working out if you get the unrestricted calculation that salary is NOT increased by inflation from September...so if you intend working for a number of years yet then even below inflation pay rises can get your final salary above that figure. But it is worth making a note of what that number is so that you don't accidentally take on a post that might drop you below it. This is one where I think you would need to examine the figures carefully and see whether another break in April may still be of some benefit/insurance.
I have abreak in service from Jan 2022 to March 2022. Does that have the sane "protective effect" as Opting Out of the scheme? I ask because after that break I have taken teaching posts that pay much less than I was being paid prior to Jan 2022. many thanks for your videos and time.
Yes, that break fully protects your final salary pension, just so long as you didn't have any previous breaks. If you had another break before 2022 then getting the best from that can depend on the salary you finish your career on before taking the pension.
Hi David, I have a question. When looking at the final salary and the best three consecutive years within the last 10 years prior to March 2022 ruling. Who chooses the best 3 years? I understand that the 3 best years could be better with inflation added than the more recent higher earnings salary. I plan to retire aged 60 this summer.
There is no "choice" as such, it is whatever set of 1095 days produce the highest value. For many those best 3 years are right back now to 2014...and as it is measured day-by-day, the final salary could be in decline! If your current best says it used months from before May 2014 then it is already too LATE to save them. I did a shorter video on identifying if your final salary is at risk: ua-cam.com/video/cjntMZ2dW2U/v-deo.html
Hi David, great videos! In 2012 I was SLT for a year then went down to TLR1, then all the way down to TLR2c but may go back up a little but not going to eclipse earlier pay with inflation. Currently my best years are showing as 2015-17, I seem to remember a few years ago, when my SLT year was flushed out of the calculations my overall pension went down even though I had just added a years contributions. I had a 3 month break in 2019 so by taking a break then should that not have locked in my 2010-2013 period which was my highest pay period? Or does this technique only work from 2022? If so do I need to take a further break for a month now to lock in the 2015-17 years? I can see my last 2 statements on TPS, can you request to see older ones? Thanks for all this help, you could be saving fellow teachers a staggering amount of money.
Thank you David, this is incredibly helpful. I have nearly 24 years in the final salary scheme and have reached pension age but am still working. According to my pension statement my best years were August 2014- August 2017, and the Method A calculation is almost a third higher (!) than the Method B. My question is: should I immediately take a break or even retire to maximise my salary? It is possible that if I stick around I'll get promoted but it seems very unlikely that my salary would increase by a third.
Ah, you are in a situation that warrants a much closer examination. As you are already over 60 your NPA60 pension will immediately go into "payment" when you next take a break from the scheme. Whether this is advantageous or not depends on stuff we don't yet know, inflation and pay rises. You say Method A is much higher than B...are you sure you have that the right way round? I would suggest you get in touch directly and I can take a look at the numbers with you. dave@dfountain.co.uk
Thanks for this information David. I have just telephoned the teacher pension helpline and they have recommended that instead of stopping my pension for a month if I want step down for my final few years (I’m not quite old enough to do phased retirement) it would be better to stop employment totally for one day then restart employment one day later e.g. cease one contract on 31st August and start a second on 2nd September. Is this correct?
Yes, that will work, the only trouble being that you need the co-operation of your employer to allow this to happen. With the opting out for a month your employer has no say in the matter, they have to follow your instructions.
David what a fantastic source of info your videos are. At 47 I find the whole pension thing a minefield that you are helping me to negotiate! Is now a bad time to take a month break with inflation so high? I’m on my highest salary at 55k and looking to leave at 55.
Inflation is actually irrelevant when it comes to timing the break. What is important is finding the peak (in REAL-TERMS) and making sure it doesn't become too old to be used. A quick check is to download the PDF version of your statement and check, on page 5, what period your "best" final average salary is coming from. If it starts in 2013 then you are at imminent risk of losing a peak as this year will, every month, will be disappearing from the calculation. Even if the £55k you are currently on is the actual highest you have been on it would still be WORSE than a 2013 salary of just £43,300. This is what I mean by a "real-terms" peak...inflation gets added to the 2013 salary and so would, in 2023, be worth more than your current £55k
Hi David. Love your videos - I wish I’d know about them earlier. I’m just confused about something. If you take a break after 12 months of a salary increase then that will lock in that year - but would it be more beneficial to take a break after three consecutive years of the higher salary, thus locking in three consecutive “big” years?
Yes, this is a tricky one to predict. Locking in a Method A is a more difficult decision than considering the method B as it has to be done quickly, a decision taken at the end of the year and not up to 8 years later. The key point to consider is whether your current salary is going to increase by more than inflation or not over the next year and then the year after that. Any time the salary increases by more than inflation then you will have locked in a lower salary than you would have had the following year and so makes it pointless. The trouble here is that you don't get to know what inflation is going to be for nearly half of the financial year until 13 months later. This makes it virtually impossible to assess whether your current Method A, the current salary, is going to be better than next year's or not. The advantage of locking in the Method A is that it will be increased by inflation. This makes it worth more than next year if the pay rise is less than inflation. If you can foresee 2 years ahead then you may decide that not opting out to keep the Method A but allowing the next two years to combine with it to give an average of those as a method B may be wiser. The advantage of doing that is you then have 3 of your most recent years used as a method B and you wouldn't need to opt out for a further 7 years to keep them since they last for 10 years anyway. Back to the Method A then with an example or two. Example 1. Your salary this year is £50,000 (Method A) 2023/24. You are getting a 5.5% pay rise. If inflation is going to be 2% then a "locked in" Method A would be worth £51,000 in a year's time The pay rise though would be worth £52,750 in a year. Conclusion opting out to preserve the Method A would not be worth it. Example 2. The salary in the following year is £52,750 (Method A) 2024/25 You get a 2% pay rise Inflation is 3% After a year the new salary would be worth £53,805 But a locked in Method A from Sep 2025 would be worth £54,332. (Note that the average Method B from the 2 years you would have in at that point would be the average of £52,530, £54,332 and £53,805 - the three years to that point with inflation of added to the first two, giving £53,556)
David. My wife is now a part time teacher and she would like to know if the pension is calculated on her salary or actual earnings each year. PS you worked with her.
Oh, she has my sympathy and probably a few apologies owed to her then, hopefully she is recovering well! The answer is that both are used in the calculation. For the "final salary" scheme any period where you work part-time the salary aspect is based on the full-time-equivalent salary. So, going part-time, of itself, has no adverse effect on the final salary pension. This is because a part-time teacher will have added less "years" to the calculation because they only get the fraction of a year that matches their part-time rate. For example a teacher on a 0.8 contract for 10 years will only have had 8 years credited to the final salary pension. For the "career average" scheme it is based on her actual earnings. Every month 1/57th of what she earned that month gets added to the CA pension. A full time teacher on £57,000 would add £1000 a year to their CA pension but a 0.5 contract would add £500.
Thanks David I took a break in 2002 for 3 months. I was head of department and then had this 3 month break. Then went back to teaching after the 3 month break as a normal teacher on lower salary for a further 20 years unto 2022. Would the TP be able to use my salary from before 2002 when I was head of department? Would this break help or was it to long ago? Thanks 👍
Absolutely! For a break before 2007 a different method is used for the final salary. It is just the best 365 days from the last 3 years. This sheet should let you compare the value of your 2002 salaries to what is shown on your statemen: docs.google.com/spreadsheets/d/1WH7kyEgdZPQqQHc54lqnKhyN3tf8XLXIX1Uvgp_DJ-g/edit?usp=sharing
I wonder what will happen if retiring in 2033 or subsequent years. Then all of the 'previous 10 years' will be under the Average Pay scheme. I assume that Method B will no longer be used and the salary in the last year of the Final Salary scheme will be used with Method A - or will TPA 'retain' the last 10 years under the Final Salary Scheme to be used for Method B?
This is taken care of with what is called the "final salary link". Future salaries continue to be used to give the "final salary" even though it is no longer possible to add "service" to the final salary scheem.
@@dfountain Many thanks. That is useful. Then I hope that taking a month out of membership of the scheme will not disadvantage the final salary link calculation.
1 day is sufficient but as you are over 60 if you started before 2007 then you can take your pension now, without leaving employment...simply opting out of the pension scheme will trigger your entitlement day - though you still have to apply for the pension
Thank you David for your fantastic advice. You offer an amazing service. How do I opt out of paying my pension for a month? Do I ask my employer not pay and inform teachers pensions? Or do i go straight to teachers pensions?
This page has links to both the opting out and in process. You complete the form directly with TPS but it is wise to alert your employer that you have done this so that they are prepared. www.teacherspensions.co.uk/members/resources/forms/joining-or-leaving-the-scheme.aspx
Hello David, This is so helpful. I took a year out of teaching (Sept 2020 to Sept 2021) during which time I received no pay and contributed no pension. Does this mean that if it works out best for me the 10 years before this break in service can be used to work out the best 3 years of service? Does the TPS calculate this automatically on benefit statements or do they need to be told?
I would suggest you get in touch so we can do the actual calculations together because a break in 2021 means that your hypothetical calculation comes in two versions, one of which gets to use ONLY the service up to September 2020 but the other can add in the service from September 2021 to March 2022 (under the McCloud remedy that is going to allow you to revert most of the career average service to the final salary scheme). You will get to have two sets of calculations for your final salary. The hypothetical that uses the 10 years from October 2010 to September 2020 and whatever turns out to be your last 10 years as well. TPS should do the calculations automatically but it's worth checking that they have when you get your paperwork. They will NOT include it on the annual benefit statement though, something that I think they could and should.
Yes, though they have done that for the most recent 3 years and you can see those if you download the PDF version of your statement. Otherwise these sheets can help you work out if any breaks you have ALREADY had from the scheme might be worth more than your current position. Breaks BEFORE 2007: docs.google.com/spreadsheets/d/1GpV3GRnT20FMog2jMMZIh1tYbO0hdmYdK6pU_NQAW94/edit?usp=sharing Breaks AFTER 2006: docs.google.com/spreadsheets/d/1GUB2WnLHm2LFmPPv6ihwMvL7VVtQLALd8Zcf58-GnZ0/edit?usp=sharing
No, a break of 1 day is sufficient, it is just that you cannot get a break of less than a month without having a break in employment. Opting out of the pension scheme in England and Wales can only be done in whole months.
Thanks David. Does it matter when you take the 1 month opt out? I changed jobs in January 2018 and took a significant pay cut at that time. So I want to lock in my higher pay in my final salary scheme - Method B currently being calculated 1 Jan 2015 - 31 Dec 2017. I am sure these will be the highest pay of my career, especially when inflation is added. Should I take the opt out sooner rather than later or would it be better to wait until near the end of the ten year window for Method B? Love your videos - thank you so much for explaining things so well!
As far as the calculation goes the timing doesn't matter so long as you don't stray into the month that moves the 10 year window beyond the start date. So, in your case you would need to get the opt out form accepted in December 2024 so that you are out of the scheme in January 2025. However, there is no need to be too pre-emptive, the deadline for you is over 2 years away and something may happen between now and then that removes the need to opt out at all. For example, a promotion that lifts your current pay over the 2015-2017 figure or a change of job that allows for a natural break from the scheme.
Hi David. Thank you so much for these amazingly helpful videos. Please could you let me know if what I've been told by TPS about taking a break from the scheme (inspired by this particular video of yours) sounds correct? Yesterday, I set about the process of opting out of the scheme for one month in order to create the break to lock in a peak salary. However, I have been told by TPS that taking a break will lead to my AAB Buy Out being automatically revoked and, of course, there's no way of applying for it again. It will also automatically revoke the Additional Pension purchase that I am one month into. If this is correct, I am at least in the relatively good position of having only done one month of both those flexibilities so little money is going down the drain (as you don't get back money you've put into Buy Out if it's revoked, as I understand it) but it'll be disappointing to lose Buy Out as I am very much intending to retire before 65. Re the Additional Pension: I have been told that the one month's payment I've made towards that will still get me roughly one-twelfth of the total I had chosen so that's fine - and once I've opted back in to the scheme I can just start a new Additional Pension purchase. So, my question is: have you heard of this issue before (a break from the scheme causing Buy Out, in particular, to be revoked)? Was the person I spoke to at TPS correct? Many thanks!
Hi Harry, did you ever bottom this out?, in a similar position but AAB since 2022,( having had earlier flexibilities refunded). However this refund has required a restarting of AAB. I’m not 100% sure but the previous 2 years AAB purchased will apply to those 2 years of contributions.. getting a complete answer from TP is not easy. Thanks
Thanks for this useful video. In light of the ruling coming into effect 1st Oct 2023, and that the final salary calculations will be extended to March 2022. Does this mean that it has effectively ended and so this is acting as a break (opting out) similar to that explained in the video? I was about to take a TP break to protect a high point in my salary but now I’m wondering whether it is now necessary due to the recent ruling, end the final salary scheme on March 2022. I’m cautious as I notice on the forms on TP website it states that by taking a break i.e. opting out, one forfeits the right to take a lump sum. Not sure what exactly that meant.
Hi, Just listened to another of your videos and found the answer! The clock does not stop with the ending of final salary scheme (March 2022 McLeod), when calculating best 3 consecutive years in last ten year period. So I’d better get my skates on and opt for a break in TP so as to protect a high point in salary 9 years ago. Thanks for educating us.
No. The transition from Final Salary to Career Average has never, and won't, create a "break". The final salary scheme has what is called the "final salary link" that means salaries from after the change to the career average scheme continue to be used in the calculation of the final salary pension. If you worked on to 2040 without any break then the final salary would be based on the salaries from 2030 to 2040. So, if your current best years being used are 2013-2016 you may want to consider "locking" them in by taking a break.
Thanks David. Until 31st August 2020 I was at L18 om LT scale. I am edging towards by 60th birthday in a year and a bit currently 58 as of 28th March 2024. I am aware I can opt out to ensure I freeze my final salary so it doesn't drop off from the peak. When is it best to take this month off? Do I need to inform TP well in advance? Thanks for any advice in advance.
This video should really have explained this. The key to not losing value is to create a break before your best REVALUED salaries become too old to be used. Note that if you have had any previous breaks you should check those first as you may already have locked in a better set of years...but it does get complicated if those breaks are before April 2022. Check pages 4/5 on your statement, the months/years being used for your best Method B are on there. If they are from 2014 then you are at imminent risk of losing some of them.
Hi David, thank you for these great videos. They are much appreciated. I have a question regarding the hypothetical calculation. If I take a one month break twelve months after starting in a new role with a substantial pay increase, won't I fall foul of the "no more than 10% increase in the last year" rule, or does that not apply in this situation? Thank you in advance of your help!
Yes, you could hit that problem. The limit being, for 2023. the greater of 10% of the previous year or an added £7,120. In which case timing the opt out to get the best of the limitation could be important, possibly delaying it until the restriction is lifted after a few more months, or if you believe the restricted amount you have at any given time when inflation is added to it will outperform such a delay.
Hi David, Thank you sooooo much for making this information understandable. I'm at a point where I am coming to the end of a three year protected salary due to a reorganisation of staff and my role becoming redundant. I will go from L9 down to UPS 3. I have no intention of ever going back into SL and currently work three days a week. I may increase days in the future. Do I need to take the break now? TIA xx
As you've got in touch via my blog I've been able to give you a much more precise answer than I will here. The KEY thing is to identify what period of time is being used, right now, as your best "final salary" period. This can be tricky because the Government often do not confirm what inflation figure is going to be applied to the Method B calculation until almost a full year later and this can lead to the statement being so far out of date that it can give a false impression. If your best final salary comes from Method A, then taking a break is likely to give you an improved calculation IF (BIG IF) your salary is rising by less than inflation (something that has happened in teaching for well over 10 years now). If your best comes from Method B then you need to check the years involved and you have until 10 years after the earliest of those to take a break...but beware...if your method B includes the most recent years, and by that I mean it includes those since last April, then the lack of an up to date inflationary increase could give a false picture and a more detailed look is required.
Hi David. Following on from your great Facebook work, at 54 I am now on my highest salary, unlikely to go higher and most likely to retire in 2 years. My TP statement shows this is definitely my highest period over the last ten years, even allowing for inflation I might choose to drop hours though before I retire for a year or two. Should I still take a month out of the pension to protect these last 12 months at high salary and, of so, do this AFTER the McCloud judgement (as I will most likely transfer my CA pension to the FS scheme)? Or do I not need to bother?
My advice would be to work out the exact figures with what you know. If your current best is method A then it is also likely that your method B will be your more recent years. Only if your method B involves years from the maximum of 10 years ago do you need to be particularly careful. Taking your method A as your best then any drop in the full-time-equivalent salary could be a problem, particularly after March 2022 - up until then the extra months you are adding to the service part of the equation can outweigh a small drop in the salary figure. With only 1 or 2 years to go you need to ask whether you believe your salary will climb by more than inflation. Personally I doubt that will happen to anyone who is already at the top of the pay scale. The latest guidance to the pay review body is to bump up the starting salary and to "flatten" the pay structure. Opting out of April 2022 means that your final salary in effect at that point creates a pension that grows with inflation from April 2022 no matter what happens to the salary. This is the essence of the pay plateau effect, by giving your pension at that point a growth based on inflation rather than you actual salary's growth you are giving it the opportunity to grow by more than you are actually going to be paid. The more years you have in the final salary scheme the more significant that can be. Set against that you can work out exact amount you are sacrificing from the career average scheme. For example, UPS3 is £41,604. Losing one month means your CA pension doesn't go up by around £61, if taken at 67...however as you may be going at 55 it would be reduced to 56% and therefore means you would reduce the CA pension by about £34...a year. Taking a 30 year career with that method A final salary of £41,604 you would have a pension, at 60, of £15,600, or if taken early at 55 £12,637 If your method B is 1% lower than that your pension would drop to £15,445 and at 55 to £12,510. That's a fall of £127. Just under £100 more than if you sacrificed a month from the CA pension. So for every 1% your method B is below your method A you would lose around £100 from the final salary.
David, this is a great video - I assume the same works for civil service pension schemes pre 2015, ie final salary to Apr 2015, extended to Apr 2022 due to Mccloud judgement, now all on average Alpha scheme - a 1 month pause now would lock in my best over past 10 years for the final salary pension? You can then rejoin the Alpha..
Hi Mark, sorry, I cannot comment on the CS pension as I don't know if the "hypothetical calculation" protection applies to other public sector schemes. I see no reason why it shouldn't but I have already been told that Scotland and Northern Ireland require an actual break in employment rather than just an opted out period so this is a question for the administrators of the CS scheme.
Hi David Thanks for this and the other video on Transitional Protection. In 2015 I was moved up to KS2 Manager and for the next three years held that post, after that point I went part-time and had subsquent drop in salary, so to protect that salary of about £45 K, do yu recommend a break in service? And how do I do it> Do I inform payroll or Teachers Pension, is there a form to fill in? Regards Linda
To be sure I'd need to see your full service history but as you moved to the higher post in 2015 you wouldn't need a break to protect that until 2025...however, you should look at your statement (page 5 of the PDF version) and it will tell you what period is currently being used for your best final average salary and base your decision on the earliest date that method B starts from.
Hi David I have just come across your video and would like clarification if possible. I have a method B calculation from 2014- 2017 of £55000 as my best salary. Looking at my pension statement this is only going to decrease as time goes on. I am going to retire in the next couple of years I am a UPS 3 and have given up TLR. Am I right in thinking that if I take a break of 1 month now those method B years will be protected? My salary is never going to reach that figure in the next year or 2! Alternatively could I just take my final salary part now? I work part time and the pension along with my part time salary wouldn't exceed the amount allowed.
If you are over 60 then you can take it now without needing a break in employment (England and Wales). If you are under 60 then you could only take it by having a break in your contract and taking BOTH pensions as "early". If you are under 60 then taking a break will put in place a protective hypothetical calculation, but do check if you have any earlier breaks as one of those might be protecting something better aleady.
Hi David I think your videos are great and you must have helped so many people. I am still confused about working out my pension and wondered if you could help.
Hi! I started teaching full time in 2006 and left in Dec 2014 taking a three month break. Within the last ten years (to date) I was on just short of 40k between (also pre-) May 2013 and Dec 2014. Nothing from Jan 2015-Apr 2015. Then Apr 2015 to now I have taught three days a week. When I ran the pension calculation based on retiring at 70, I was mortified - it feels like so little. Will I still be able to lock in a peak salary based on the given info (just) or have I missed the boat?!
As you have had breaks previously this isn't possible to answer without a proper look at your full service history. It may well be that the break in 2014 may already be superior to what you are currently using. If you want to get in touch my email is dave@dfountain.co.uk
Hi David. I am a 53 year old teacher planning to retire at 60. I have been at the top of the main upper pay scale for about 20 years. My best three years are from 2014 to 2017. Inflation has recently been relatively high and we received a reasonable pay rise last year. With all this considered I would appreciate your advice as to when is best for opting out of paying my pension for one month, if I should at all? Thank you.
If your best years are 2014-17 then last years "reasonable" pay rise was 6.5%. 2014-17 is going to get the benefit this year of inflation increases of 6.7%. As such 2014-17 is going to pull further ahead of your current salary. Note that your current salary is not going to get the full benefit of the 6.5% increase until it has been paid for 12 months, that is by 31 August 2024. Method B will get the full 6.7% increase with effect virtually 5 months earlier as on 8 April 2024.
Thank you for your reply. So I need to take a break in paying my pension before I “lose” 2014? Does this mean I need to do it before April, when it is revalued?@@dfountain
Hi David, thank you so much for taking your retirement to share this wealth of knowledge with the rest of us.. It's really appreciated! I was on my highest salary up to Aug 2021 and then dropped to working 4 days from Sept 2021..Will the drop in my salary mean I need to opt out for a month asap? I plan to retire at 58 in April 2027. Thanks in advance
Oops just had a look at my summary of benefits and my final salary arrangement using method b states that my best average salary period was April 2013-april 2016. My salary is unlikely to rise now before retirement.. I presume it might be worth opting out for a month to freeze this best salary period?
I'm afraid your statement is out of date...as we are now in August your last 10 years can only go back to September 2013 and no longer use April 2013 to August 2013. You may want to contact me directly to take a look and check: dave@dfountain.co.uk
My wife had a short break from teaching a few years ago due to a fixed term contract ending in the July and her not starting another one until Sept. Does this mean her final salary has already been locked in and she can't now do anything about that?
It will have locked in the salary at that time but may not get to use the full amount of years unless her salary rises above what it was at that time. This does not stop her using future salary increases in the calculation of this pension as her break was less than 5 years long. Breaks before April 2022 are a little more complex as there are two versions to the protective hypothetical calculation , a restricted and an unrestricted version. This "form" will lead you through making the assessment as to which one it might be: docs.google.com/forms/d/e/1FAIpQLSdHaC_gMuGlPivU7KRR2XaMwBS_Xy2oobOOCPn1cDZhN33LHg/viewform?usp=sf_link
Hi David, This, and all your videos, are really useful. I find the pensions rather confusing. I am going down to 4 days. I am moving schools and will have a break in January of about 8 days. When I phoned up the pension people and asked about taking a month out to secure my final salary, they told me that as I was moving schools, I only needed one day out the scheme to secure it. Is this correct?
Hi David. So a a head of school, i have been since January 2023. I have been in the role for 14 months. There are no current opportunities to rise therefore, is it a good option to take a month out to boost my pension? I’ve been a member since September 2002. If so, how do I take a month out? Do my employers still contribute? Do I receive the income I would have paid to pension? How do I restart contributions? Would my employer restart contributions after?
So, no chance to progress up the leadership spine and for that to outpace inflation? If you have only just become a HT then you may find that your current Method A is "restricted" - you will need to work out at what point that restriction may end and whether by then if your Method B might be better anyway...in other words try to find the "peak" - that is the point at which you should consider taking a month out, if you believe wage rises will be less than inflation, locking in a "peak" that can then benefit from inflation. Whilst you are opted out your employer does not contribute. You will get the 10-11% you would pay to the scheme paid out to you (minus income tax of course) as it would not be taken from your pay that month. To restart you tell your employer you want to go back in the following month - there is another form on the TPS website - and yes, your employer starts paying again. The only hiccup here is if you are in the Independent sector and your school has withdrawn from the TPS.
Yes, but beware, the standard school contract is to start you on 1 September no matter what day the first "work" day is in the month. This follows the STPCD (school teachers pay and conditions document) that is compulsory for all maintained schools in England and Wales, where a teacher is employed for full "terms".
David, this is amazing! Thank you. I have just looked and see that best salary period under method B is 1/1/14 to 31/12/16, so this is very time sensitive for me now that I'm only doing casual supply at a much lower salary whilst juggling a different job and family commitments! I can't see me going back into teaching fully before retirement (even though I've only 47), and certainly not with any responsibility, so the 2014-2016 won't be beaten and is revalued for inflation to higher than the current top of UPS 3. I want to opt out ASAP, but please can you confirm I've understood that if I opt out now and then opt back in after a month (from 1st Jan 2024) that I will have protected that period? I assume if I did end up going back in at a higher salary that I could again take a 1 month break after a full year to protect this new higher salary anyway? Thanks in advance!
Yes, that is correct. It creates an EXTRA calculation and not a replacement, so if you did go on to higher things in the future you would still get the benefit of them in this pension.
Thanks, David. Just remembered when looking at my statement that I had two breaks, one in 2005-2006 and then 6 weeks in 2007. Does it 'reset' each time you have a break, or should the best salary from 2003-2005 be used if this was higher (when I had highest TLR) as this is probably worth more when revalued than my 2014-2016 salary? Would the second 6 week break have reset the earlier better salary and put me back to square 1 or is there some other reason this doesn't count for the calculation?
@@HelenBanwell Each break is considered as a separate hypothetical calculation, so you will have those two plus any more you create ON TOP of the final calculation. Whichever produces the best pension is the one that will be used. This sheet will let you see what each of them would be worth in April 2023: docs.google.com/spreadsheets/d/1WH7kyEgdZPQqQHc54lqnKhyN3tf8XLXIX1Uvgp_DJ-g/edit?usp=sharing (Make a copy of the sheet to be able to enter your own numbers) Note that for breaks BEFORE 2007 your best final average salary is calculated differently. Those earlier years are simply the best single year (365 consecutive days) out of the last 3 years. However, you also need to be aware that, for breaks before April 2022, there are TWO versions. The "restricted" and the "unrestricted" version. To get the best of these you do need to finish your career on a HIGHER salary than it was back at the time of the break. For you, though, this is unlikely to be a problem since we are talking about 16+ years ago and pay rises, even the below inflation ones teachers have had, should have lifted your current salary well over what you were paid in the early 2000s.
I was 60 in August and haven't had a break in service so as I understand it my final salary pension won't get any better than what it is now. I've looked at all the other revalued salaries on my TP statement and 2014-2017 is the best
It is more likely to be getting WORSE. (Unless you are heading for a pay rise that exceeds inflation and can lift your current salary over that existing Method B (all the time noting that the Method B would be getting inflationary increases). I'm afraid you are looking back at a past "peak" that is disappearing in the mist. Take a look at these two videos where I examine the options for those working past 60: ua-cam.com/video/omPUVMhyPBk/v-deo.html ua-cam.com/video/laH9eWCbHcU/v-deo.html There is a good chance you are currently working "for free".
Thank you David for providing us with this information, I can't believe that this information cannot be found anywhere on the TPS website. I wish I'd seen this 8 years ago when our school went through restructuring. I am planning on retiring this December age 57, but the highest year (of the 3 consecutively highest years) salary in the last 10 years is from 1/4/12 to 31/3/13. I am not sure if it is worth me trying to opt out for a month and then opt back in, as the time scale is so short. I'm worried that there would not be enough time to complete the process before December. Approximately how long does it take from filling in the form to opt-out, to then being back in the scheme?
I'm sorry to say that I think you may be looking at the statement for the last financial year and not your most current one. If the method B started on 1/04/2012 then, as we are in September 2022, that date is ALREADY more than 10 years ago. Indeed, the maximum time you can go back to right now, if you are still teaching, is October 2012. I would say that it would be best not to guess. Get in touch with me via my blog at dfountain.co.uk and I can show you what effects staying in and opting out will have on your pension between now and January. Opting out is an online form that schools have to process with effect from the 1st day of the next month...so get it in this week and you will be out in October. Opting back in has the same time scale.
Does the current annual salary still count towards the 'final salary pension', in years worked after the changeover in April 2022, for all those with contributions still in the old final salary scheme? (even though all staff will be on the career average scheme from April 2022)
Yes. This is something called the "final salary link". If you work through to 2050 then the salaries in the years 2040 to 2050 will be the ones used in the calculation of your final salary pension even though all of those years will be "in" the career average scheme. Taking a break from the scheme creates an extra calculation, so if you took a break in 2023, and carried on until 2050, you would get a calculation that used the salaries from 2013 to 2023 AS WELL AS the 2040-2050 ones. The final salary scheme is based on the expectation that salaries at the end of a career would be higher than those from the first years and so it would have been very unfair to have stopped the use of future salaries in the calculation of this pension because it would have limited those who had just started in the scheme to salaries from the early part of their careers.
Hi David. My highest 3 years by method B are 2014-2017 due to a TLR. My pay is set to reduce in April. I have 8 yrs remaining and planning to retire at 60. Seeing as I am now in the career average scheme, do I need to take a break to lock in that 10yr period. Will my salary from 2024 onwards be used to revalue the final salary scheme?
Hi David I recently had a meeting with my schools pension advisor who told me taking a break for 1 month would do nothing towards causing a break with regards to my pension. He advised it would take a break of five years. Obviously being out of TPS for five years would be very costly. Are you able to provide any literature to support this one month break? I’d like to take it back to him. Many thanks
If you are in England and Wales then there is the hypothetical calculation. The TPS have details on this here: www.teacherspensions.co.uk/-/media/documents/member/factsheets/applying-for-retirement/hypothetical-calculations-v1-april-2019.ashx The definition of "pensionable employment" is in the teacher regulations: www.legislation.gov.uk/uksi/2010/990/made/data.pdf Page 5 covers the opting out element: Election for employment not to be pensionable 9.-(1) A person may make an election under this regulation by giving written notice to the Secretary of State. (2) An election has effect from the first day of the month after the month in which the notice is given. (3) But if the notice is given before or within 3 months after the start of employment in a capacity mentioned in Schedule 2, the election has effect from the first day of that employment. (4) An election ceases to have effect from the date on which an election under regulation 10 (election for employment to be pensionable) has effect. If you are in Scotland, and NI I think, then the break has to be a full break in service. That is a period where you are not employed. Your advisor is mis-informed and is mixing up what is called the "disqualifying break" with this break in pensionable employment. A disqualifying break completely separates the pension before and after the break into two separate pensions. A break in pensionable employment on the other hand gives you the best of both. Your final salary pension is then based on the better of the calculations to the break and, after the break, to the date of your final exit.
Thank you David for providing some clarity for such a complex calculation. I wonder if you could please give your opinion on my situation. I’ve been in the pension scheme since 2006, I believe I’m at my highest salary now and for various reasons I’m about to leave teaching at the end of this month (Feb) at the age of 41, so a fair way from retirement. If I didn’t return to teaching, is there anything you’d recommend I do to safeguard my future pension? How are the calculations made if the time from leaving my pension contributions to retirement exceed 10 years? Or on the other hand if I were to return to the teachers pension, possibly after a year or two break it is likely I would be on a significantly lower salary, again is there anything you’d recommend. (I assume any return would be on a career average as you mention so I’m assuming it shouldn’t interfere with a final salary calculation). I hope I’ve made a little bit of sense with my attempt at questions and would be so grateful for any of your thoughts. Thank you!
As 2006 your service is in the Final Salary 80ths scheme with a retirement age of 60. Earliest access at 55. This is one of the schemes that has a protected age and so is, under the current legislation, not going to rise to 57 in 2028. Your pension will be protected by this break. It will always get to use the 10 year period from March 2012 to February 2022 no matter how far into the future it is before you take it. Even if you did return it would still get to use this time period. If you return within 5 years then it will ALSO (not instead) use the 10 years back from the next time you leave or finish in the scheme. When multiple calculations such as this are done then you always get the BEST result...the exact point of this video ;) Returning within 5 years means that you maintain the final salary link but this is only of any relevance if you were to then go on to a higher salary than the one you left on (after the one you left on is adjusted for inflation!). In terms of what you can do then bear in mind the 5 year clock. Returning to a TPS eligible post before 5 years and 1 day have passed resets that clock, so you could in 4-5 years time look to do a day's supply work directly with a school that allows you to be in the TPS (doing supply work through an agency isn't TPS-eligible). BEWARE!...if your school offers you a zero-hours supply contract taking it may prevent the 'break' from the TPS, in which case the 10 year clock will continue to advance and could knock out some of your higher salaries given time.
@@dfountain thank you so much. Just to check, as long as I don't earn more in the future it's not necessary for me to return to the TPS within the 5 year period. Thanks again.
@@dfountain thank you. Sorry for not making sense. I was trying to understand the benefit of returning to the pension within 5 years versus later other than the obvious money being paid in. Thanks again for your explanation, I’m so grateful.
Ah. Yes. There is one other, potentially quite significant advantage! If you have built up some in the career average scheme and leave then each year it increases with inflation. However, if you continued teaching then it also gets 1.6% uplift. It may not sound much but as it is compounded over the years it can make quite a difference. Now, the advantage of returning within 5 years is that your CA pension is revalued as though you never left. It gets the 1.6% uplift for each year - even those you were away from teaching. Example. Assume inflation at 2% a year £1000 in the scheme. TEACHER WHO HAS LEFT Year 0: £1000.00 Year 1: £1020.00 Year 2: £1040.40 Year 3: £1061.21 ... Year 10: £1218.99 TEACHER WHO RETURNS ONCE EVERY 5 YEARS Year 0: £1000.00 Year 1: £1036.00 Year 2: £1073.30 Year 3: £1111.93 ... Year 10: £1424.29 Taken to the extreme a teacher who returns for a single day in the scheme before more than 5 years have passed will, in 10 years, have a fairly substantial increase in their pension over one who just left and didn't do two days work at the right time!
Thanks for the videos David, such a great help, wish I had found earlier! As someone who is starting to lose some very helpful AST salary from 2012-2016 using the Method B calculation, I am urgently trying to protect them as I can see my benefit statement going down! I am currently on UPS3, so I guess the one month opt-out is the way ahead? However, I did take a ‘year-off’ and leave the scheme in 2016, so I’m not sure if this would have already protected this salary? If that was the case, shouldn’t this show somehow on the benefit statement already? In the absence of certainty, another one month break might be the safer bet? I have contacted the TP message service, so hope they can also provide clarity. Thanks.
It is very likely to have done this BUT there is one potential CATCH to look out for. This video goes into the detail: ua-cam.com/video/sFGJbmtMQHQ/v-deo.html For breaks before April 2022 there are two versions of the protective hypothetical calculation. Restricted or unrestricted. Restricted will only use your service up the date you left in 2016 whereas the unrestricted version gets to use all of your service up to April 2022, adding a potential extra 6 years - a stunning advantage since those 6 years can be on a much lower salary. To get the unrestricted version you need to finish your career on a higher salary, even by just 1p, than you had back at the time of the break. The 2016 "final average salary" therefore becomes the target to beat. It is calculated with inflation added only to 2016 and then never changes. (The pension it create gets the inflation from 2016 hence the reason it can beat a later, higher, salary).
@@dfountain thanks so much for such a speedy and helpful reply. I now feel I am getting to heart of the issue, with all its complexities. It doesn’t help that ‘Teachers’ Pensions will apply hypothetical calculations at the point retirement benefits are taken’. I assume this also implies that the current benefit statement completely overlooks these breaks and could therefore be way off from what could actually happen once these calculations are applied? It feels like fishing around in the dark for answers. Once I really understand the questions I think the next step is a detailed discussion with TP about actual average recorded salaries and then establishing whether it would be wise to take another break. Just to clarify… would the 2016 ‘final average salary’ probably be the best three in ten at the time of break in service, rather than the ‘revalued’ salary shown on my statement today? Sorry for all the questions. Many thanks again!
@dtravels TPS are very reluctant to do the calculation - I must see if I can knock up a spreadsheet that will allow you to to get a rough idea of the values at the time. The Government did say, in response to the consultation, that the new RSS (not the current "rollback" but the new "remediable service statements") would include hypothetical calculations - but I will only believe that when I see it. The problem with comparing the 2016 salary to your current best 3, which most likely come from 2014-2017, is that the latter have a lot of inflation added to them. To get a rough idea of what your "target" from 2016 will be just look at what you were actually earning back in 2016. The final average salary will be a bit higher than that figure. As your current best though still includes nearly 3 years from that period it will easily exceeds it, the problem is that as you move forward and those 2014 to 16 years get to old to be used your final average salary will fall....so what you want to do is compare your target to the years that will still be inside the 10 year window on the date you intend leaving...so if you are going to teach until 2030 then look at the revalued 2020-2024 years. Those will grow with inflation so do stand a good chance of overtaking the target.
Thank-you once again: it's confusing, but slowly makes really good sense the more times I read it, thanks to your detailed answer. To make this even more nuanced (and risk overstaying my welcome in these comments 🙂)... 1. I can see that my 2016-17 break in service also included a reduced salary (0.8pte) in the final four months before the break, but hopefully this will not matter as it's the best three in ten at that time? 2. I also had another break in service a month or two later in late 2017; I assume this would just make the first break the less favourable evaluation point (based on 3 in 10) and therefore the first break would simply be ignored in the final calculation of pension benefits? Many thanks again! @@dfountain
@@ahowardtravels Part time employment doesn't affect the "final average salary" because this calculation uses the full time salary figure - just make sure that the "annual salary" amount IS the full-time-equivalent amount! Where you have two breaks you get two hypothetical calculations, whichever produces the best pension is the one that will be used.
Hi David. I know there have been lots of question and I do appreciate your time and effort here - I am kind of in the abyss in terms of knowledge about pensions. I am due to step down from Deputy at the end of this academic year. I started in the scheme in September 2001. I will take on the role as Assistant Head from September with a significant pay decrease. It might be worth knowing that I have been DHT for the past 4 years and, prior to that, AHT for 10 years, After watching this video, I plan to take a break until September. Do you think this is wise? Many thanks!
I'd really need to see your full service history to do the maths but you would only need a break of a single month, you don't need to stay out of the scheme until September. I'd also say that it is very likely that your "Method B" is currently the best, and in this case it's worth checking what years are being used in it. Unless you've been moving up a pay range then it is likely that your best years are 2019-2022 as these DHT years will get the most benefit from this year's 10.1% inflation figure. If that is the case then you don't actually need a break at all until 2029, that is just before the 2019 salary becomes too old to be used. Taking a month out whilst you are still on your DHT's salary would mean sacrificing more from the CA pension than if you took a month out upon starting that new lower paid post.
Hi, it took me a while to get my head around this and I think I have finally got it. However, I’m a bit worried that I might have missed the boat as my current forecast downloaded today from tps says my best calculation uses method B and takes the 3 years from Sept 2014 to Sept 2017. I thought this gave me time to put in a month break but, reading another comment, am I right that the statement might not be up to date? In that case maybe I have missed an opportunity.
You are fine. All months before 2023 get the same inflationary increase and this maintains the relative values and as such your older months, from earlier in 2014, cannot "overtake" September 2014 and later. This means you have plenty of time to take a break to protect Sep 14 onwards.
I'm afraid I don't know. This is published on the TPS website and as the Act referred to is not specifically about the TPS I suppose there might be equivalent names or interpretations of it in other public sector schemes: "Hypothetical calculations were introduced by the Pensions (Increase) Act 1971 to members who, after completing sufficient service to qualify for retirement benefits, had a break in pensionable service and then at a later date returned to pensionable employment."
This applies to me. I have taken out life insurance to cover the death grant payment I forfeit when taking a break. My only concern now is whether there might be a delay in my employer putting me back into the pension scheme following my one month break. I don't want to end up with a 6 month break! Do you now whether this is a real danger or how to avoid it please David?
The rules of the scheme are clear, the employer MUST enrol you from the 1st day of the next month after receiving your instructions to do so. Keep a paper trail by completing the form on the TPS website and emailing your employer telling them of your intention. Schools are allowed to retrospectively correct and take deductions for the pension so there should be no problem. Don't let them fob you off if they do make a mistake and try to delay reinstatement.
One more question. As we’ve just had a payrise, should I wait until next September before taking a break. I’m just wondering whether splitting this year’s salary might be a mistake. When a break is put in, can the pension calculation be based on just the one final year before the break or would it be the best 3 of the last 10 before the break?
It is based on the better of either the Method A or B. However, the pay rise is NOT going to overtake Method B...the pay rise was 6.5%, and it doesn't get that in full until it's been paid for a full year, that being to the end of August 2024, whereas the Method B is going to get the inflation increase of 6.7% 5 months earlier than that in April 2024.
Thank you@@dfountain. I've taken the one month break as I am about to lose my best 3 in the last 10. I wish I'd known about this a few years ago because I think it would have been even more beneficial then. I've taken out life insurance to cover the death grant and will stop paying it once I rejoin the scheme. I may lose £70 per year in my pension if teachers pay improves over the next 6.5 years. However, that doesn't seem like something I'd be unhappy about as it will mean teachers pay has increased and my pension will be better than currently forecast anyway. So thank you again for this advice. I'm looking forward to seeing the inflation being added to my method B in February - April and seeing how much better it's looking then.
I’m 25. This is only my 3rd year working, 2nd year as a teacher. I want to learn more about this but I’m so confused. What are the calculations? Don’t they automatically put a certain amount of our pay into the pension? Why does it matter what our average pay was for the calculations? Isn’t it all in the pot anyway? This is so confusing haha
A lot of the more complicated calculations you can ignore as you won't have any service in the final salary schemes. This video is only relevant to such schemes...for you I suggest you take a look at this video: ua-cam.com/video/kJpS3lS3h10/v-deo.html The CA scheme is far (FAR) simpler and has a lot less tricky parts to it...though do be aware of the 5-year break rule as this can have a significant impact if you have built up a pension before taking such a break and then return for a longer period.
Hi David I’m currently on just over £60k but as a result of taking a salary sacrifice for a cycle to work scheme TPS has my salary as £58147. This will be settled by May this year. I’m 58 and want to reduce to a .80 timetable for a year before beginning phased retirement. Should I take a break to protect my FS? I’ve been teaching since 2004. Thanks in advance.
Firstly you need to get them to CORRECT your salary as recorded for the pension. A salary sacrifice should not be taken off your reported pensionable earnings for several sacrificial options, including the "cycle to work" scheme: www.teacherspensions.co.uk/employers/managing-members/contributions/types-of-contribution.aspx Then you need to check what your best 36 months are on your statement, if they include 2014 then a month out soon may be prudent. However, just because you are dropping to 0.8 does not take your "final average salary" down with it (unless you are also dropping a TLR or down a pay scale), because it is the full time EQUIVALENT salary that is used in this calculation and not what you are paid. Also note, that if you intend taking phased retirement you have to drop to 80% of the previous year's salary AT the time you take the phased pension. Dropping to 80% this September but not wanting to take phased retirement until the following year would therefore mean dropping to 0.64, or lower, in September 2025.
No. Part of the protection to new mothers is that maternity counts as continuous service (up to the year) so that they cannot be unfairly targeted for redundancy. In addition, whilst on maternity pay, you are adding the full amount of pension as though you were still working - even though your contributions could be less.
@@dfountain Thank you David. I’m going back part time so I will definitely look into taking a break from paying it as I’m dropping my leadership responsibilities (and pay!)
Great. Best place to start is with your statement. It will tell you what your current best "final salary" is based on. If it is Method A then a month out as soon as you return may be advisable. If it is Method B then check the dates involved, you will have up to 10 years after the starting date before you actually "need" a break. Download and save the one before you return on your new pay level as this will have your "salary" at the date you leave. You can then use this in the future to determine if you need another break or not.
@@dfountain Thank you! I don’t think I’ve ever seen my pension statement so I’ll look into finding it! I’ve been teaching for 8 years so hopefully been building up!
Hi David Not sure how to contact you direct but simpleish q maybe Made redundant in sept 2021 at age 53 after 28 years teaching Last ten years teaching salaries approx 48K,48,49,49,49,50,51,51,63,63 After six month break I have started teaching again on salary of 40K on a 6 month contract which may extend after sept 2022 Likely to retire at 55 Have opted out TPS as I am concerned it may impact on my current calculation which is Method A ie last 12 months After six months ie in Sept 2021 I may carry on teaching for another couple of years or not return to teaching and do something else Any thoughts or advice v much appreciated as TPS only confuse me when I call? Want to safeguard my current Method A
My blog is dfountain.co.uk and contact details are there. Firstly there is no need to worry about the effect on your pension any more. The break you have will protect your pension completely and so you can opt back in and add to your pension quite safely. The only thing that will worry and annoy you from this point on though is that the benefit statement TPS will produce will completely ignore the calculation that is forced by your break in service/opted out period and so your final salary pension will "look" as though it is going down. TPS refuse to include this calculation on the benefit statement by claiming that it depends on your future salaries, which, IMO, is a complete cop-out! i.e. as soon as you opt back in your Method A will drop drastically but it will always be used in the calculation to the start of the break. Now, there is something in the proposed legislation that will allow you to reinstate those missing months if you can tell TPS that the reason you opted out was because you didn't want to be in the career average scheme. Clearly being concerned about the effect on your final salary pension would be such grounds in my opinion. You would need to pay in the missing contributions and I would suggest you work out whether it's be worth it or not for you. As your method A was your best at the time you finished it is unlikely to be the case unless you were to carry on working for a few more years and your method B from the time was fairly close to it then.
@@dfountain Massively appreciate the help- Thanks for confirming that the break/opt out was the best way forward although I am still a bit paranoid about taking a lower salary and paying more TPS incase they remove my Method A current figure
This factsheet from TPS may help@ www.teacherspensions.co.uk/-/media/documents/member/factsheets/applying-for-retirement/hypothetical-calculations-v1-april-2019.ashx But I suspect you will want to message TPS directly and get them to confirm that your hypothetical calculation to the date of the break WILL use your final average salary - specifically the Method A - that was applicable at the time. Nothing wrong with being cautious.
Hi Dave this is really great info - I have not paid attention to my teachers pension until now and am learning a lot from your videos - thanks for taking the time to make these - it is clear from reading the comments that it helps a lot of people. I'm 51 and started in 1998 with no breaks. My best actual salary was in 2018/19 and has dropped a little and stayed the same since then although my statement shows my revalued salary has significantly higher amounts from 2013-19 and method B uses values from 2014-2017. I wonder if I should have the one month break now to protect these amounts for my FS portion I can take in 9 yrs and whether that will also help my CA part to take when I'm 65 (I'm doing AAB buyout) and will probably stay to 65 (or will this period be too far from 65 to be counted?) My salary has not changed since 2019 and is unlikely to change for the rest of my career (and I would think not beat any inflation at the moment!) I'm also not sure what to do with the FS portion at 60 - take it one month early to miss abatement and carry on full time or to take phased retirement at 60? Does the phasing and reduced salary from 60 to 65 affect the future CA part? Seems crazy to leave the FS pension and lump sum sitting there doing nothing for 5 yrs but what's the best way to make use of it ? Are there any other options I'm not aware of ? Thanks for your awesome work!
Yes, a lot of tricky parts to this, not least because you are 9 years away from 60 and that's a lot of time in which to add to the CA pension. Taking a month out before your 2014 salary starts to drop off would seem to be a sensible precaution. As for taking the FS pension before 60 to sidestep the abatement question it's a lot trickier for those, like yourself, who would have to commit to taking a large proportion of the CA pension at the same time. The FS pension though will be, at most, 24/80ths of your salary and as such you may have sufficient headroom between your salary at that time and the limit that will be imposed. Especially if you were to consider moving to a part time role at that time. However, that is a long way off and so it's probably just worth keeping it in mind and considering again if you have any breaks in employment after you reach the minimum pension age.
@@dfountain thanks for your quick reply - I will definitely look at that - would I lose the AAB buyout election if I take a one month break and then restart as it was a one time offer to do it in 2015 ? Thanks again for your wisdom!
Hi David Thank you so much for your videos they are so so informative. I have a question , my best years in my pension statement are 01/09/2014 - 31/08/2017. Following your really helpful information I intend to take action now to opt out for one month from the TPS to lock in these best years before September 2024. Am I correct in assuming that once I opt back in to the TPS , the years after 31/08/ 2017 - 2022 are still included when calculating my final salary scheme . And the years after 2022 only impact my average salary ?
Thanks David ..this is perfect for me.Mid 50s and at top of ups with zero ambition to go further.I'm preparing for retirement in the next few years and will almost definitely be opting out for a month.i checked on the TPA site and that said that my wages 10 years ago were higher than now when adjusted for inflation.I really appreciate your effort and clarity in your videos.
Thanks for commenting.
Just be careful to work out when might be the best time...you can ADD service time right up to 31 March 2022 so I would suggest you need to work out what effect that increase in time together with the fall in final salary means for your pension.
After March there isn't the same conundrum because no more time can be added.
In the worst/best case I have seen I caught a colleague who had stepped down from a deputy head role just before they started to lose those higher salaries...in their case they were better off opting out for THREE YEARS, otherwise they'd have paid over £10,000 in pension contributions with the end result that their pension would have gone DOWN.
The calculation isn't too hard but if you want a hand just give me a should via the website at dfountain.co.uk
@@dfountain thanks David.. I'll check your website out
Hi I would really appreciate it if you can tell me where on the TPA site you can find the wages adjusted for inflation figure? Thank you.
On your benefit statement (download the PDF), it has your last 10 years with the actual and revalued salaries. They start on page 3 and go on from there.
@@dfountain Thank you David
Thanks David - can you advise how I go about opting out for one month and then rejoining? Thanks.
Thank you for these videos - much appreciated. Now it's half term, I am finally (at age 57) trying to get my head around the "complicated world of TPS"! My "Method B" dates are 2015 - 2018, which I believe means these are the "peak 3 years" due to inflation adjustment. I have been in three middle leadership roles from 2007 to present, I moved posts in 2014 and then 2017. I am therefore guessing the three year interval in the middle was the "peak". Thanks again for highlighting this - and the need for life insurance cover during the month break. I'll contact the TPS to discuss further....
Do you have any breaks prior to 2022 already?
Very informative, thank you. By pure luck I appear to taken a break at just the right time. Started in 2007, and left for 3 years in 2018.
Yes, that's likely to cover some of the better years, 2008 to 2018. You are also going to be eligible under the McCloud judgement to swap your service back from the current career average to the final salary scheme for the period 1 Apr 2015 to 31 Mar 2022, but this is going to be tricky to work out. When you do come to retire make sure you have examined all the potential options as your break lead to the restricted rather than unrestricted hypothetical calculation.
@@dfountain looks like I'm going to be watching your video on McCloud later! Thanks, you are doing a great job.
David has a wealth of knowledge on pension. He gives excellent advice and well worth chatting to. Thank you David
Thank you for that comment. I always try to steer clear of giving 'advice' as such as that is a heavily regulated area but I can help anyone work out what the different options will give them in £ and pence...as always though this is heavily dependent on what may, or may not, happen in the future. The key point this video is trying to make is that you can tell what the downside is with a high level of certainty - the one month lost from the scheme, particularly in the career average variant, is a known amount - whereas the potential improvement in the final salary portion is entirely dependent on future pay and inflation. Looking back at my career I could see several points in time where I could tell with confidence that I wasn't going to get any more significant pay increases for a while and this advice then would have been useful ;)
Thanks David - really great resource, I've spent the last day going through most of your videos and website.
In TPS since 2009, with best salary 2015-2018, so finding this now has been a big help. Top of salary last 8 years, but salary now still lower than 15-18 inflation adjusted figure. Will put in a months break asap. I'm 48 and looking to leave at 57.
As I have both final salary (NPA65) and Career Average (NPA67) - would I be able to take both at 55 or 57?
There is some uncertainty in this area. On its OWN the final salary scheme has protected age status allowing it to be taken at 55, but when you also have a career average pension the generally accepted interpretation is that this prevents taking either of them until 57. Personally I would like to see the link that forces this removed, or even challenged in the courts, but nothing has been resolved yet.
Brilliant advice, thanks David. Hope you don’t mind me asking a question. My partner is a teacher and looking at her statement the best 3 consecutive years for the final salary is currently 2013-2016 as she stood up to HT for a year in the that period. The average salary is probably £5k above what she is currently paid. I have said, following on from what I understand from your excellent video, that she should opt out for a month now before the 2013-2016 period disappears from the 10 year look back. Of course I have said she needs to get advice from someone more knowledgeable then me but is my understanding correct? Many thanks in anticipation.
Absolutely. Unless she has had a previous break this would be the most sensible option - but even if she has had a previous break the loss to the CA pension from taking a month out now is quite minimal.
Hi David... I can see an option to 'Opt Out' of the TPS on the website. Is this the same as taking a break?
Yes, in England and Wales, opting out creates a break.
Hi David, if you opt out for a month to lock in your best three years do the years before the break you create continue to rise through index linking or do they remain at the value they were at the time of the break?
For the calculation of the pension to the date of the break they remain the same, but the pension then gets the revaluation through index-linking from the date of the break for that hypothetical calculation - so, in effect, it is the same as if they kept getting increased.
For use in the "normal" calculation they continue getting revalued.
Thanks David, your videos are so helpful - much appreciated. My method B best three years were 2014-2017. I am going to take a months break but didn't get my act together to start that on 1st August. Should I just do that as soon as possible (Sept if I can) or is there a particular month this year that is more beneficial? - March or next August for example? If you got the chance to answer this query that would be great.
The best time is before it falls any further, this will happen when you get into the month listed as being the start of your 3 years, most likely September 2014.
You have to opt out for a calendar month and this should be taken as the next calendar month after you submit the opt out form. Submit it now, in August, and they should take you out for September but if you waited until 1 September to send in the form then that should take you out of October.
@@dfountain yes, the start of my best three years is Sept 2014 so opting out for the month of Sept is not as good as opting out for the month of August but as the ship has sailed for opting out in August I should just do it ASAP
My goodness, I thought I knew about pensions but obviously not. Not sure how much this impacts me as I have earned my highest salary (£10000 more) in what will be the last three years of my working life. I am 58 and intend retiring either at 59 or going to 60 with approximately 34 years in the scheme. I am under the impression that I will receive final salary scheme of 80ths but will need to check this out. I shall arrange a pension analysis through the union (UCU) as they are usually pretty good. Thank you for highlighting these things as I would not have become aware.
You do need to have someone who understands the scheme look at it very carefully as there are ALSO limits on how much your pay can increase in the final 3 years.
With 34 years in you will have transitioned from the final salary scheme to the career average scheme at some point since 2015, probably in the 2020s, however this transition was illegal (see my explanation of the McCloud judgement). You will be able to choose whether your service from 2015 to March 2022 is in the final salary 80ths scheme or in the newer career average scheme. Your service from April 2022 WILL be in the newer career average scheme.
Hi David. Thanks for the videos. A colleague shared this today and having checked TPS I realise I should have done this some time ago. I was a HOD on UPS 3 until Sept 2019 and am now just a UPS 3 class teacher. On TPS it says my 3 best years are Oct 2014-Nov 2017. Does this mean the horse has bolted or would it still be worthwhile to take a month gap ASAP?
Unless you have had a break at some point then you have lost October and November 2014, but acting now will prevent the loss of any more of those remaining best 34 months.
Hi David
Thank you so much for your videos they are so so informative. I have a question , my best years in my pension statement are 01/09/2014 - 31/08/2017. Following your really helpful information I intend to take action now to opt out for one month from the TPS to lock in these best years before September 2024. Am I correct in assuming that once I opt back in to the TPS , the years after 31/08/ 2017 - 2022 are still included when calculating my final salary scheme . And the years after 2022 only impact my average salary ?
Yes, those years are still included.
Also if you were to go on to a much higher salary in the future that salary can still be used...though it would have to be a pretty good increase given that your 2014-17 figures are probably already around 10% higher than your current salary.
Thank you so much for excellent help here . Hoping opt out doesn’t take too long to process? … as best years on my pension statement start from 01/09/2014.. so needs to be done by September 2024.
A great video Dave. I have just taken a one-month break in pension contributions to do exactly this.
Taking a break before April 2022 does mean that you will need to keep an eye on whether you will get the 'restricted' hypothetical calculation rather than the better 'unrestricted' one. After April there is no difference between the two.
Thanks - I took the break in September as my pay dropped then.
If you have since gone back into the scheme then unless you finish on a higher salary (calculated from the last 12 months OR best 3-in-last-10-years) then the months since the break won't be counted in the final salary calculation that is done to that break. (They will be used in the normal end of employment calculation).
If you have your statement from the month you took the break it will tell you what that salary figure is. In working out if you get the unrestricted calculation that salary is NOT increased by inflation from September...so if you intend working for a number of years yet then even below inflation pay rises can get your final salary above that figure. But it is worth making a note of what that number is so that you don't accidentally take on a post that might drop you below it.
This is one where I think you would need to examine the figures carefully and see whether another break in April may still be of some benefit/insurance.
I have abreak in service from Jan 2022 to March 2022. Does that have the sane "protective effect" as Opting Out of the scheme?
I ask because after that break I have taken teaching posts that pay much less than I was being paid prior to Jan 2022.
many thanks for your videos and time.
Yes, that break fully protects your final salary pension, just so long as you didn't have any previous breaks. If you had another break before 2022 then getting the best from that can depend on the salary you finish your career on before taking the pension.
Hi David, I have a question. When looking at the final salary and the best three consecutive years within the last 10 years prior to March 2022 ruling. Who chooses the best 3 years? I understand that the 3 best years could be better with inflation added than the more recent higher earnings salary. I plan to retire aged 60 this summer.
There is no "choice" as such, it is whatever set of 1095 days produce the highest value.
For many those best 3 years are right back now to 2014...and as it is measured day-by-day, the final salary could be in decline!
If your current best says it used months from before May 2014 then it is already too LATE to save them.
I did a shorter video on identifying if your final salary is at risk: ua-cam.com/video/cjntMZ2dW2U/v-deo.html
Hi David, great videos! In 2012 I was SLT for a year then went down to TLR1, then all the way down to TLR2c but may go back up a little but not going to eclipse earlier pay with inflation. Currently my best years are showing as 2015-17, I seem to remember a few years ago, when my SLT year was flushed out of the calculations my overall pension went down even though I had just added a years contributions. I had a 3 month break in 2019 so by taking a break then should that not have locked in my 2010-2013 period which was my highest pay period? Or does this technique only work from 2022? If so do I need to take a further break for a month now to lock in the 2015-17 years? I can see my last 2 statements on TPS, can you request to see older ones? Thanks for all this help, you could be saving fellow teachers a staggering amount of money.
Have a go at this: docs.google.com/forms/d/e/1FAIpQLSdHaC_gMuGlPivU7KRR2XaMwBS_Xy2oobOOCPn1cDZhN33LHg/viewform?usp=sf_link
Thank you David, this is incredibly helpful. I have nearly 24 years in the final salary scheme and have reached pension age but am still working. According to my pension statement my best years were August 2014- August 2017, and the Method A calculation is almost a third higher (!) than the Method B. My question is: should I immediately take a break or even retire to maximise my salary? It is possible that if I stick around I'll get promoted but it seems very unlikely that my salary would increase by a third.
Ah, you are in a situation that warrants a much closer examination. As you are already over 60 your NPA60 pension will immediately go into "payment" when you next take a break from the scheme. Whether this is advantageous or not depends on stuff we don't yet know, inflation and pay rises.
You say Method A is much higher than B...are you sure you have that the right way round?
I would suggest you get in touch directly and I can take a look at the numbers with you. dave@dfountain.co.uk
Thank you so much, I will do! @@dfountain
Thanks for this information David. I have just telephoned the teacher pension helpline and they have recommended that instead of stopping my pension for a month if I want step down for my final few years (I’m not quite old enough to do phased retirement) it would be better to stop employment totally for one day then restart employment one day later e.g. cease one contract on 31st August and start a second on 2nd September. Is this correct?
Yes, that will work, the only trouble being that you need the co-operation of your employer to allow this to happen. With the opting out for a month your employer has no say in the matter, they have to follow your instructions.
@ great thanks for the heads up 🤞they will agree but I have a back up plan if not
I really appreciate all the information you share on the videos
David what a fantastic source of info your videos are. At 47 I find the whole pension thing a minefield that you are helping me to negotiate! Is now a bad time to take a month break with inflation so high? I’m on my highest salary at 55k and looking to leave at 55.
Inflation is actually irrelevant when it comes to timing the break. What is important is finding the peak (in REAL-TERMS) and making sure it doesn't become too old to be used. A quick check is to download the PDF version of your statement and check, on page 5, what period your "best" final average salary is coming from. If it starts in 2013 then you are at imminent risk of losing a peak as this year will, every month, will be disappearing from the calculation.
Even if the £55k you are currently on is the actual highest you have been on it would still be WORSE than a 2013 salary of just £43,300. This is what I mean by a "real-terms" peak...inflation gets added to the 2013 salary and so would, in 2023, be worth more than your current £55k
Hi David.
Love your videos - I wish I’d know about them earlier. I’m just confused about something. If you take a break after 12 months of a salary increase then that will lock in that year - but would it be more beneficial to take a break after three consecutive years of the higher salary, thus locking in three consecutive “big” years?
Yes, this is a tricky one to predict. Locking in a Method A is a more difficult decision than considering the method B as it has to be done quickly, a decision taken at the end of the year and not up to 8 years later.
The key point to consider is whether your current salary is going to increase by more than inflation or not over the next year and then the year after that.
Any time the salary increases by more than inflation then you will have locked in a lower salary than you would have had the following year and so makes it pointless.
The trouble here is that you don't get to know what inflation is going to be for nearly half of the financial year until 13 months later. This makes it virtually impossible to assess whether your current Method A, the current salary, is going to be better than next year's or not.
The advantage of locking in the Method A is that it will be increased by inflation. This makes it worth more than next year if the pay rise is less than inflation.
If you can foresee 2 years ahead then you may decide that not opting out to keep the Method A but allowing the next two years to combine with it to give an average of those as a method B may be wiser. The advantage of doing that is you then have 3 of your most recent years used as a method B and you wouldn't need to opt out for a further 7 years to keep them since they last for 10 years anyway.
Back to the Method A then with an example or two.
Example 1. Your salary this year is £50,000 (Method A) 2023/24.
You are getting a 5.5% pay rise.
If inflation is going to be 2% then a "locked in" Method A would be worth £51,000 in a year's time
The pay rise though would be worth £52,750 in a year.
Conclusion opting out to preserve the Method A would not be worth it.
Example 2. The salary in the following year is £52,750 (Method A) 2024/25
You get a 2% pay rise
Inflation is 3%
After a year the new salary would be worth £53,805
But a locked in Method A from Sep 2025 would be worth £54,332.
(Note that the average Method B from the 2 years you would have in at that point would be the average of £52,530, £54,332 and £53,805 - the three years to that point with inflation of added to the first two, giving £53,556)
David. My wife is now a part time teacher and she would like to know if the pension is calculated on her salary or actual earnings each year. PS you worked with her.
Oh, she has my sympathy and probably a few apologies owed to her then, hopefully she is recovering well!
The answer is that both are used in the calculation.
For the "final salary" scheme any period where you work part-time the salary aspect is based on the full-time-equivalent salary. So, going part-time, of itself, has no adverse effect on the final salary pension. This is because a part-time teacher will have added less "years" to the calculation because they only get the fraction of a year that matches their part-time rate. For example a teacher on a 0.8 contract for 10 years will only have had 8 years credited to the final salary pension.
For the "career average" scheme it is based on her actual earnings. Every month 1/57th of what she earned that month gets added to the CA pension. A full time teacher on £57,000 would add £1000 a year to their CA pension but a 0.5 contract would add £500.
Thanks David
I took a break in 2002 for 3 months. I was head of department and then had this 3 month break. Then went back to teaching after the 3 month break as a normal teacher on lower salary for a further 20 years unto 2022. Would the TP be able to use my salary from before 2002 when I was head of department? Would this break help or was it to long ago? Thanks 👍
Absolutely!
For a break before 2007 a different method is used for the final salary. It is just the best 365 days from the last 3 years.
This sheet should let you compare the value of your 2002 salaries to what is shown on your statemen: docs.google.com/spreadsheets/d/1WH7kyEgdZPQqQHc54lqnKhyN3tf8XLXIX1Uvgp_DJ-g/edit?usp=sharing
I wonder what will happen if retiring in 2033 or subsequent years. Then all of the 'previous 10 years' will be under the Average Pay scheme. I assume that Method B will no longer be used and the salary in the last year of the Final Salary scheme will be used with Method A - or will TPA 'retain' the last 10 years under the Final Salary Scheme to be used for Method B?
This is taken care of with what is called the "final salary link". Future salaries continue to be used to give the "final salary" even though it is no longer possible to add "service" to the final salary scheem.
@@dfountain Many thanks. That is useful. Then I hope that taking a month out of membership of the scheme will not disadvantage the final salary link calculation.
Thank you these videos. I am now 60 and reducing my days in September. How long do l need to take a break before starting the lower hours?
1 day is sufficient but as you are over 60 if you started before 2007 then you can take your pension now, without leaving employment...simply opting out of the pension scheme will trigger your entitlement day - though you still have to apply for the pension
Thank you David for your fantastic advice. You offer an amazing service. How do I opt out of paying my pension for a month? Do I ask my employer not pay and inform teachers pensions? Or do i go straight to teachers pensions?
This page has links to both the opting out and in process. You complete the form directly with TPS but it is wise to alert your employer that you have done this so that they are prepared. www.teacherspensions.co.uk/members/resources/forms/joining-or-leaving-the-scheme.aspx
@@dfountain thank you so much for coming back to me so quickly. Best wishes and in appreciation
Hello David, This is so helpful. I took a year out of teaching (Sept 2020 to Sept 2021) during which time I received no pay and contributed no pension. Does this mean that if it works out best for me the 10 years before this break in service can be used to work out the best 3 years of service? Does the TPS calculate this automatically on benefit statements or do they need to be told?
I would suggest you get in touch so we can do the actual calculations together because a break in 2021 means that your hypothetical calculation comes in two versions, one of which gets to use ONLY the service up to September 2020 but the other can add in the service from September 2021 to March 2022 (under the McCloud remedy that is going to allow you to revert most of the career average service to the final salary scheme).
You will get to have two sets of calculations for your final salary.
The hypothetical that uses the 10 years from October 2010 to September 2020 and whatever turns out to be your last 10 years as well.
TPS should do the calculations automatically but it's worth checking that they have when you get your paperwork. They will NOT include it on the annual benefit statement though, something that I think they could and should.
Do you have to workout the inflation for each year hen sum to get the best 3 years of salary in the scheme
Yes, though they have done that for the most recent 3 years and you can see those if you download the PDF version of your statement.
Otherwise these sheets can help you work out if any breaks you have ALREADY had from the scheme might be worth more than your current position.
Breaks BEFORE 2007: docs.google.com/spreadsheets/d/1GpV3GRnT20FMog2jMMZIh1tYbO0hdmYdK6pU_NQAW94/edit?usp=sharing
Breaks AFTER 2006: docs.google.com/spreadsheets/d/1GUB2WnLHm2LFmPPv6ihwMvL7VVtQLALd8Zcf58-GnZ0/edit?usp=sharing
Thank you David. Does the break need to be at least 1 month? Are shorter breaks treated differentlty? Best wishes.
No, a break of 1 day is sufficient, it is just that you cannot get a break of less than a month without having a break in employment.
Opting out of the pension scheme in England and Wales can only be done in whole months.
@@dfountain Ah, great thank you. Will the benefit statement illustrate the results of 'protecting' the salary? Best wishes.
Thanks David. Does it matter when you take the 1 month opt out? I changed jobs in January 2018 and took a significant pay cut at that time. So I want to lock in my higher pay in my final salary scheme - Method B currently being calculated 1 Jan 2015 - 31 Dec 2017. I am sure these will be the highest pay of my career, especially when inflation is added. Should I take the opt out sooner rather than later or would it be better to wait until near the end of the ten year window for Method B? Love your videos - thank you so much for explaining things so well!
As far as the calculation goes the timing doesn't matter so long as you don't stray into the month that moves the 10 year window beyond the start date. So, in your case you would need to get the opt out form accepted in December 2024 so that you are out of the scheme in January 2025.
However, there is no need to be too pre-emptive, the deadline for you is over 2 years away and something may happen between now and then that removes the need to opt out at all. For example, a promotion that lifts your current pay over the 2015-2017 figure or a change of job that allows for a natural break from the scheme.
Hi David. Thank you so much for these amazingly helpful videos. Please could you let me know if what I've been told by TPS about taking a break from the scheme (inspired by this particular video of yours) sounds correct? Yesterday, I set about the process of opting out of the scheme for one month in order to create the break to lock in a peak salary. However, I have been told by TPS that taking a break will lead to my AAB Buy Out being automatically revoked and, of course, there's no way of applying for it again. It will also automatically revoke the Additional Pension purchase that I am one month into. If this is correct, I am at least in the relatively good position of having only done one month of both those flexibilities so little money is going down the drain (as you don't get back money you've put into Buy Out if it's revoked, as I understand it) but it'll be disappointing to lose Buy Out as I am very much intending to retire before 65. Re the Additional Pension: I have been told that the one month's payment I've made towards that will still get me roughly one-twelfth of the total I had chosen so that's fine - and once I've opted back in to the scheme I can just start a new Additional Pension purchase. So, my question is: have you heard of this issue before (a break from the scheme causing Buy Out, in particular, to be revoked)? Was the person I spoke to at TPS correct? Many thanks!
Hi Harry, did you ever bottom this out?, in a similar position but AAB since 2022,( having had earlier flexibilities refunded). However this refund has required a restarting of AAB. I’m not 100% sure but the previous 2 years AAB purchased will apply to those 2 years of contributions.. getting a complete answer from TP is not easy.
Thanks
Thanks for this useful video. In light of the ruling coming into effect 1st Oct 2023, and that the final salary calculations will be extended to March 2022. Does this mean that it has effectively ended and so this is acting as a break (opting out) similar to that explained in the video? I was about to take a TP break to protect a high point in my salary but now I’m wondering whether it is now necessary due to the recent ruling, end the final salary scheme on March 2022. I’m cautious as I notice on the forms on TP website it states that by taking a break i.e. opting out, one forfeits the right to take a lump sum. Not sure what exactly that meant.
Hi, Just listened to another of your videos and found the answer! The clock does not stop with the ending of final salary scheme (March 2022 McLeod), when calculating best 3 consecutive years in last ten year period. So I’d better get my skates on and opt for a break in TP so as to protect a high point in salary 9 years ago. Thanks for educating us.
No. The transition from Final Salary to Career Average has never, and won't, create a "break". The final salary scheme has what is called the "final salary link" that means salaries from after the change to the career average scheme continue to be used in the calculation of the final salary pension. If you worked on to 2040 without any break then the final salary would be based on the salaries from 2030 to 2040.
So, if your current best years being used are 2013-2016 you may want to consider "locking" them in by taking a break.
Thanks David. Until 31st August 2020 I was at L18 om LT scale. I am edging towards by 60th birthday in a year and a bit currently 58 as of 28th March 2024. I am aware I can opt out to ensure I freeze my final salary so it doesn't drop off from the peak. When is it best to take this month off? Do I need to inform TP well in advance? Thanks for any advice in advance.
This video should really have explained this.
The key to not losing value is to create a break before your best REVALUED salaries become too old to be used.
Note that if you have had any previous breaks you should check those first as you may already have locked in a better set of years...but it does get complicated if those breaks are before April 2022.
Check pages 4/5 on your statement, the months/years being used for your best Method B are on there. If they are from 2014 then you are at imminent risk of losing some of them.
Hi David, thank you for these great videos. They are much appreciated. I have a question regarding the hypothetical calculation. If I take a one month break twelve months after starting in a new role with a substantial pay increase, won't I fall foul of the "no more than 10% increase in the last year" rule, or does that not apply in this situation? Thank you in advance of your help!
Yes, you could hit that problem. The limit being, for 2023. the greater of 10% of the previous year or an added £7,120.
In which case timing the opt out to get the best of the limitation could be important, possibly delaying it until the restriction is lifted after a few more months, or if you believe the restricted amount you have at any given time when inflation is added to it will outperform such a delay.
Thank you!@@dfountain
Hi David, Thank you sooooo much for making this information understandable. I'm at a point where I am coming to the end of a three year protected salary due to a reorganisation of staff and my role becoming redundant. I will go from L9 down to UPS 3. I have no intention of ever going back into SL and currently work three days a week. I may increase days in the future. Do I need to take the break now? TIA xx
As you've got in touch via my blog I've been able to give you a much more precise answer than I will here.
The KEY thing is to identify what period of time is being used, right now, as your best "final salary" period. This can be tricky because the Government often do not confirm what inflation figure is going to be applied to the Method B calculation until almost a full year later and this can lead to the statement being so far out of date that it can give a false impression.
If your best final salary comes from Method A, then taking a break is likely to give you an improved calculation IF (BIG IF) your salary is rising by less than inflation (something that has happened in teaching for well over 10 years now).
If your best comes from Method B then you need to check the years involved and you have until 10 years after the earliest of those to take a break...but beware...if your method B includes the most recent years, and by that I mean it includes those since last April, then the lack of an up to date inflationary increase could give a false picture and a more detailed look is required.
Hi David. Following on from your great Facebook work, at 54 I am now on my highest salary, unlikely to go higher and most likely to retire in 2 years. My TP statement shows this is definitely my highest period over the last ten years, even allowing for inflation I might choose to drop hours though before I retire for a year or two. Should I still take a month out of the pension to protect these last 12 months at high salary and, of so, do this AFTER the McCloud judgement (as I will most likely transfer my CA pension to the FS scheme)? Or do I not need to bother?
My advice would be to work out the exact figures with what you know.
If your current best is method A then it is also likely that your method B will be your more recent years.
Only if your method B involves years from the maximum of 10 years ago do you need to be particularly careful.
Taking your method A as your best then any drop in the full-time-equivalent salary could be a problem, particularly after March 2022 - up until then the extra months you are adding to the service part of the equation can outweigh a small drop in the salary figure.
With only 1 or 2 years to go you need to ask whether you believe your salary will climb by more than inflation. Personally I doubt that will happen to anyone who is already at the top of the pay scale. The latest guidance to the pay review body is to bump up the starting salary and to "flatten" the pay structure.
Opting out of April 2022 means that your final salary in effect at that point creates a pension that grows with inflation from April 2022 no matter what happens to the salary. This is the essence of the pay plateau effect, by giving your pension at that point a growth based on inflation rather than you actual salary's growth you are giving it the opportunity to grow by more than you are actually going to be paid. The more years you have in the final salary scheme the more significant that can be.
Set against that you can work out exact amount you are sacrificing from the career average scheme.
For example, UPS3 is £41,604. Losing one month means your CA pension doesn't go up by around £61, if taken at 67...however as you may be going at 55 it would be reduced to 56% and therefore means you would reduce the CA pension by about £34...a year.
Taking a 30 year career with that method A final salary of £41,604 you would have a pension, at 60, of £15,600, or if taken early at 55 £12,637
If your method B is 1% lower than that your pension would drop to £15,445 and at 55 to £12,510.
That's a fall of £127. Just under £100 more than if you sacrificed a month from the CA pension.
So for every 1% your method B is below your method A you would lose around £100 from the final salary.
David, this is a great video - I assume the same works for civil service pension schemes pre 2015, ie final salary to Apr 2015, extended to Apr 2022 due to Mccloud judgement, now all on average Alpha scheme - a 1 month pause now would lock in my best over past 10 years for the final salary pension? You can then rejoin the Alpha..
Hi Mark, sorry, I cannot comment on the CS pension as I don't know if the "hypothetical calculation" protection applies to other public sector schemes. I see no reason why it shouldn't but I have already been told that Scotland and Northern Ireland require an actual break in employment rather than just an opted out period so this is a question for the administrators of the CS scheme.
@@dfountain thanks for this, I'll certainly ask the administrators 👍
Hi David
Thanks for this and the other video on Transitional Protection.
In 2015 I was moved up to KS2 Manager and for the next three years held that post, after that point I went part-time and had subsquent drop in salary, so to protect that salary of about £45 K, do yu recommend a break in service? And how do I do it> Do I inform payroll or Teachers Pension, is there a form to fill in?
Regards
Linda
To be sure I'd need to see your full service history but as you moved to the higher post in 2015 you wouldn't need a break to protect that until 2025...however, you should look at your statement (page 5 of the PDF version) and it will tell you what period is currently being used for your best final average salary and base your decision on the earliest date that method B starts from.
Hi David I have just come across your video and would like clarification if possible. I have a method B calculation from 2014- 2017 of £55000 as my best salary. Looking at my pension statement this is only going to decrease as time goes on. I am going to retire in the next couple of years I am a UPS 3 and have given up TLR. Am I right in thinking that if I take a break of 1 month now those method B years will be protected? My salary is never going to reach that figure in the next year or 2! Alternatively
could I just take my final salary part now? I work part time and the pension along with my part time salary wouldn't exceed the amount allowed.
If you are over 60 then you can take it now without needing a break in employment (England and Wales).
If you are under 60 then you could only take it by having a break in your contract and taking BOTH pensions as "early".
If you are under 60 then taking a break will put in place a protective hypothetical calculation, but do check if you have any earlier breaks as one of those might be protecting something better aleady.
Hi David I think your videos are great and you must have helped so many people. I am still confused about working out my pension and wondered if you could help.
Certainly. Get in touch via my blog dfountain.co.uk
Hi! I started teaching full time in 2006 and left in Dec 2014 taking a three month break. Within the last ten years (to date) I was on just short of 40k between (also pre-) May 2013 and Dec 2014. Nothing from Jan 2015-Apr 2015. Then Apr 2015 to now I have taught three days a week. When I ran the pension calculation based on retiring at 70, I was mortified - it feels like so little. Will I still be able to lock in a peak salary based on the given info (just) or have I missed the boat?!
As you have had breaks previously this isn't possible to answer without a proper look at your full service history. It may well be that the break in 2014 may already be superior to what you are currently using.
If you want to get in touch my email is dave@dfountain.co.uk
Thank you!
Hi David. I am a 53 year old teacher planning to retire at 60. I have been at the top of the main upper pay scale for about 20 years. My best three years are from 2014 to 2017. Inflation has recently been relatively high and we received a reasonable pay rise last year. With all this considered I would appreciate your advice as to when is best for opting out of paying my pension for one month, if I should at all? Thank you.
If your best years are 2014-17 then last years "reasonable" pay rise was 6.5%.
2014-17 is going to get the benefit this year of inflation increases of 6.7%.
As such 2014-17 is going to pull further ahead of your current salary.
Note that your current salary is not going to get the full benefit of the 6.5% increase until it has been paid for 12 months, that is by 31 August 2024.
Method B will get the full 6.7% increase with effect virtually 5 months earlier as on 8 April 2024.
Thank you for your reply. So I need to take a break in paying my pension before I “lose” 2014? Does this mean I need to do it before April, when it is revalued?@@dfountain
Hi David, thank you so much for taking your retirement to share this wealth of knowledge with the rest of us.. It's really appreciated! I was on my highest salary up to Aug 2021 and then dropped to working 4 days from Sept 2021..Will the drop in my salary mean I need to opt out for a month asap? I plan to retire at 58 in April 2027. Thanks in advance
Oops just had a look at my summary of benefits and my final salary arrangement using method b states that my best average salary period was April 2013-april 2016. My salary is unlikely to rise now before retirement.. I presume it might be worth opting out for a month to freeze this best salary period?
I'm afraid your statement is out of date...as we are now in August your last 10 years can only go back to September 2013 and no longer use April 2013 to August 2013.
You may want to contact me directly to take a look and check: dave@dfountain.co.uk
My wife had a short break from teaching a few years ago due to a fixed term contract ending in the July and her not starting another one until Sept. Does this mean her final salary has already been locked in and she can't now do anything about that?
It will have locked in the salary at that time but may not get to use the full amount of years unless her salary rises above what it was at that time.
This does not stop her using future salary increases in the calculation of this pension as her break was less than 5 years long.
Breaks before April 2022 are a little more complex as there are two versions to the protective hypothetical calculation , a restricted and an unrestricted version.
This "form" will lead you through making the assessment as to which one it might be: docs.google.com/forms/d/e/1FAIpQLSdHaC_gMuGlPivU7KRR2XaMwBS_Xy2oobOOCPn1cDZhN33LHg/viewform?usp=sf_link
Hi David, This, and all your videos, are really useful. I find the pensions rather confusing. I am going down to 4 days. I am moving schools and will have a break in January of about 8 days. When I phoned up the pension people and asked about taking a month out to secure my final salary, they told me that as I was moving schools, I only needed one day out the scheme to secure it. Is this correct?
Yes, they are correct.
But do check your new contract doesn't start on 1 January. Most do even if your first day through the gates isn't until later.
Hi David. So a a head of school, i have been since January 2023. I have been in the role for 14 months. There are no current opportunities to rise therefore, is it a good option to take a month out to boost my pension? I’ve been a member since September 2002. If so, how do I take a month out? Do my employers still contribute? Do I receive the income I would have paid to pension? How do I restart contributions? Would my employer restart contributions after?
So, no chance to progress up the leadership spine and for that to outpace inflation?
If you have only just become a HT then you may find that your current Method A is "restricted" - you will need to work out at what point that restriction may end and whether by then if your Method B might be better anyway...in other words try to find the "peak" - that is the point at which you should consider taking a month out, if you believe wage rises will be less than inflation, locking in a "peak" that can then benefit from inflation.
Whilst you are opted out your employer does not contribute. You will get the 10-11% you would pay to the scheme paid out to you (minus income tax of course) as it would not be taken from your pay that month. To restart you tell your employer you want to go back in the following month - there is another form on the TPS website - and yes, your employer starts paying again. The only hiccup here is if you are in the Independent sector and your school has withdrawn from the TPS.
Will a 4 day break (ending contract end of August and new commencing new one on the 5th September) constitute as a break? Thanks
Yes, but beware, the standard school contract is to start you on 1 September no matter what day the first "work" day is in the month. This follows the STPCD (school teachers pay and conditions document) that is compulsory for all maintained schools in England and Wales, where a teacher is employed for full "terms".
David, this is amazing! Thank you. I have just looked and see that best salary period under method B is 1/1/14 to 31/12/16, so this is very time sensitive for me now that I'm only doing casual supply at a much lower salary whilst juggling a different job and family commitments! I can't see me going back into teaching fully before retirement (even though I've only 47), and certainly not with any responsibility, so the 2014-2016 won't be beaten and is revalued for inflation to higher than the current top of UPS 3.
I want to opt out ASAP, but please can you confirm I've understood that if I opt out now and then opt back in after a month (from 1st Jan 2024) that I will have protected that period?
I assume if I did end up going back in at a higher salary that I could again take a 1 month break after a full year to protect this new higher salary anyway?
Thanks in advance!
Yes, that is correct.
It creates an EXTRA calculation and not a replacement, so if you did go on to higher things in the future you would still get the benefit of them in this pension.
Thanks, David. Just remembered when looking at my statement that I had two breaks, one in 2005-2006 and then 6 weeks in 2007. Does it 'reset' each time you have a break, or should the best salary from 2003-2005 be used if this was higher (when I had highest TLR) as this is probably worth more when revalued than my 2014-2016 salary? Would the second 6 week break have reset the earlier better salary and put me back to square 1 or is there some other reason this doesn't count for the calculation?
@@HelenBanwell Each break is considered as a separate hypothetical calculation, so you will have those two plus any more you create ON TOP of the final calculation. Whichever produces the best pension is the one that will be used.
This sheet will let you see what each of them would be worth in April 2023: docs.google.com/spreadsheets/d/1WH7kyEgdZPQqQHc54lqnKhyN3tf8XLXIX1Uvgp_DJ-g/edit?usp=sharing
(Make a copy of the sheet to be able to enter your own numbers)
Note that for breaks BEFORE 2007 your best final average salary is calculated differently. Those earlier years are simply the best single year (365 consecutive days) out of the last 3 years.
However, you also need to be aware that, for breaks before April 2022, there are TWO versions. The "restricted" and the "unrestricted" version.
To get the best of these you do need to finish your career on a HIGHER salary than it was back at the time of the break. For you, though, this is unlikely to be a problem since we are talking about 16+ years ago and pay rises, even the below inflation ones teachers have had, should have lifted your current salary well over what you were paid in the early 2000s.
Thank you so much, David, this is so helpful! Really appreciate you taking the time to give such specific responses
I was 60 in August and haven't had a break in service so as I understand it my final salary pension won't get any better than what it is now. I've looked at all the other revalued salaries on my TP statement and 2014-2017 is the best
It is more likely to be getting WORSE. (Unless you are heading for a pay rise that exceeds inflation and can lift your current salary over that existing Method B (all the time noting that the Method B would be getting inflationary increases).
I'm afraid you are looking back at a past "peak" that is disappearing in the mist.
Take a look at these two videos where I examine the options for those working past 60:
ua-cam.com/video/omPUVMhyPBk/v-deo.html
ua-cam.com/video/laH9eWCbHcU/v-deo.html
There is a good chance you are currently working "for free".
Thank you I will have a look
Thank you David for providing us with this information, I can't believe that this information cannot be found anywhere on the TPS website. I wish I'd seen this 8 years ago when our school went through restructuring. I am planning on retiring this December age 57, but the highest year (of the 3 consecutively highest years) salary in the last 10 years is from 1/4/12 to 31/3/13. I am not sure if it is worth me trying to opt out for a month and then opt back in, as the time scale is so short. I'm worried that there would not be enough time to complete the process before December. Approximately how long does it take from filling in the form to opt-out, to then being back in the scheme?
I'm sorry to say that I think you may be looking at the statement for the last financial year and not your most current one.
If the method B started on 1/04/2012 then, as we are in September 2022, that date is ALREADY more than 10 years ago. Indeed, the maximum time you can go back to right now, if you are still teaching, is October 2012.
I would say that it would be best not to guess. Get in touch with me via my blog at dfountain.co.uk and I can show you what effects staying in and opting out will have on your pension between now and January. Opting out is an online form that schools have to process with effect from the 1st day of the next month...so get it in this week and you will be out in October. Opting back in has the same time scale.
Does the current annual salary still count towards the 'final salary pension', in years worked after the changeover in April 2022, for all those with contributions still in the old final salary scheme? (even though all staff will be on the career average scheme from April 2022)
Yes. This is something called the "final salary link".
If you work through to 2050 then the salaries in the years 2040 to 2050 will be the ones used in the calculation of your final salary pension even though all of those years will be "in" the career average scheme.
Taking a break from the scheme creates an extra calculation, so if you took a break in 2023, and carried on until 2050, you would get a calculation that used the salaries from 2013 to 2023 AS WELL AS the 2040-2050 ones.
The final salary scheme is based on the expectation that salaries at the end of a career would be higher than those from the first years and so it would have been very unfair to have stopped the use of future salaries in the calculation of this pension because it would have limited those who had just started in the scheme to salaries from the early part of their careers.
@@dfountain Thank you for this excellent, detailed answer. Cheers.
Hi David. My highest 3 years by method B are 2014-2017 due to a TLR. My pay is set to reduce in April. I have 8 yrs remaining and planning to retire at 60. Seeing as I am now in the career average scheme, do I need to take a break to lock in that 10yr period. Will my salary from 2024 onwards be used to revalue the final salary scheme?
Yes, if your "best" are getting too old to be used, then the only way to protect them is to take a break.
Hi David
I recently had a meeting with my schools pension advisor who told me taking a break for 1 month would do nothing towards causing a break with regards to my pension. He advised it would take a break of five years. Obviously being out of TPS for five years would be very costly.
Are you able to provide any literature to support this one month break? I’d like to take it back to him.
Many thanks
If you are in England and Wales then there is the hypothetical calculation.
The TPS have details on this here: www.teacherspensions.co.uk/-/media/documents/member/factsheets/applying-for-retirement/hypothetical-calculations-v1-april-2019.ashx
The definition of "pensionable employment" is in the teacher regulations: www.legislation.gov.uk/uksi/2010/990/made/data.pdf
Page 5 covers the opting out element:
Election for employment not to be pensionable
9.-(1) A person may make an election under this regulation by giving written notice to the Secretary of State.
(2) An election has effect from the first day of the month after the month in which the notice is given.
(3) But if the notice is given before or within 3 months after the start of employment in a capacity mentioned in Schedule 2, the election has effect from the first day of that employment.
(4) An election ceases to have effect from the date on which an election under regulation 10 (election for employment to be pensionable) has effect.
If you are in Scotland, and NI I think, then the break has to be a full break in service. That is a period where you are not employed.
Your advisor is mis-informed and is mixing up what is called the "disqualifying break" with this break in pensionable employment. A disqualifying break completely separates the pension before and after the break into two separate pensions. A break in pensionable employment on the other hand gives you the best of both. Your final salary pension is then based on the better of the calculations to the break and, after the break, to the date of your final exit.
Thank you David for providing some clarity for such a complex calculation. I wonder if you could please give your opinion on my situation. I’ve been in the pension scheme since 2006, I believe I’m at my highest salary now and for various reasons I’m about to leave teaching at the end of this month (Feb) at the age of 41, so a fair way from retirement. If I didn’t return to teaching, is there anything you’d recommend I do to safeguard my future pension? How are the calculations made if the time from leaving my pension contributions to retirement exceed 10 years? Or on the other hand if I were to return to the teachers pension, possibly after a year or two break it is likely I would be on a significantly lower salary, again is there anything you’d recommend. (I assume any return would be on a career average as you mention so I’m
assuming it shouldn’t interfere with a final salary calculation). I hope I’ve made a little bit of sense with my attempt at questions and would be so grateful for any of your thoughts. Thank you!
As 2006 your service is in the Final Salary 80ths scheme with a retirement age of 60. Earliest access at 55. This is one of the schemes that has a protected age and so is, under the current legislation, not going to rise to 57 in 2028.
Your pension will be protected by this break. It will always get to use the 10 year period from March 2012 to February 2022 no matter how far into the future it is before you take it. Even if you did return it would still get to use this time period. If you return within 5 years then it will ALSO (not instead) use the 10 years back from the next time you leave or finish in the scheme. When multiple calculations such as this are done then you always get the BEST result...the exact point of this video ;)
Returning within 5 years means that you maintain the final salary link but this is only of any relevance if you were to then go on to a higher salary than the one you left on (after the one you left on is adjusted for inflation!).
In terms of what you can do then bear in mind the 5 year clock. Returning to a TPS eligible post before 5 years and 1 day have passed resets that clock, so you could in 4-5 years time look to do a day's supply work directly with a school that allows you to be in the TPS (doing supply work through an agency isn't TPS-eligible).
BEWARE!...if your school offers you a zero-hours supply contract taking it may prevent the 'break' from the TPS, in which case the 10 year clock will continue to advance and could knock out some of your higher salaries given time.
@@dfountain thank you so much. Just to check, as long as I don't earn more in the future it's not necessary for me to return to the TPS within the 5 year period. Thanks again.
Not sure what you mean. If you do not return within 5 years then the pension you have already built up will continue to grow with inflation.
@@dfountain thank you. Sorry for not making sense. I was trying to understand the benefit of returning to the pension within 5 years versus later other than the obvious money being paid in. Thanks again for your explanation, I’m so grateful.
Ah. Yes. There is one other, potentially quite significant advantage!
If you have built up some in the career average scheme and leave then each year it increases with inflation.
However, if you continued teaching then it also gets 1.6% uplift. It may not sound much but as it is compounded over the years it can make quite a difference.
Now, the advantage of returning within 5 years is that your CA pension is revalued as though you never left. It gets the 1.6% uplift for each year - even those you were away from teaching.
Example. Assume inflation at 2% a year
£1000 in the scheme.
TEACHER WHO HAS LEFT
Year 0: £1000.00
Year 1: £1020.00
Year 2: £1040.40
Year 3: £1061.21
...
Year 10: £1218.99
TEACHER WHO RETURNS ONCE EVERY 5 YEARS
Year 0: £1000.00
Year 1: £1036.00
Year 2: £1073.30
Year 3: £1111.93
...
Year 10: £1424.29
Taken to the extreme a teacher who returns for a single day in the scheme before more than 5 years have passed will, in 10 years, have a fairly substantial increase in their pension over one who just left and didn't do two days work at the right time!
Thanks for the videos David, such a great help, wish I had found earlier! As someone who is starting to lose some very helpful AST salary from 2012-2016 using the Method B calculation, I am urgently trying to protect them as I can see my benefit statement going down! I am currently on UPS3, so I guess the one month opt-out is the way ahead? However, I did take a ‘year-off’ and leave the scheme in 2016, so I’m not sure if this would have already protected this salary? If that was the case, shouldn’t this show somehow on the benefit statement already? In the absence of certainty, another one month break might be the safer bet? I have contacted the TP message service, so hope they can also provide clarity. Thanks.
It is very likely to have done this BUT there is one potential CATCH to look out for.
This video goes into the detail: ua-cam.com/video/sFGJbmtMQHQ/v-deo.html
For breaks before April 2022 there are two versions of the protective hypothetical calculation. Restricted or unrestricted.
Restricted will only use your service up the date you left in 2016 whereas the unrestricted version gets to use all of your service up to April 2022, adding a potential extra 6 years - a stunning advantage since those 6 years can be on a much lower salary.
To get the unrestricted version you need to finish your career on a higher salary, even by just 1p, than you had back at the time of the break.
The 2016 "final average salary" therefore becomes the target to beat. It is calculated with inflation added only to 2016 and then never changes. (The pension it create gets the inflation from 2016 hence the reason it can beat a later, higher, salary).
@@dfountain thanks so much for such a speedy and helpful reply. I now feel I am getting to heart of the issue, with all its complexities. It doesn’t help that ‘Teachers’ Pensions will apply hypothetical calculations at the point retirement benefits are taken’. I assume this also implies that the current benefit statement completely overlooks these breaks and could therefore be way off from what could actually happen once these calculations are applied? It feels like fishing around in the dark for answers. Once I really understand the questions I think the next step is a detailed discussion with TP about actual average recorded salaries and then establishing whether it would be wise to take another break. Just to clarify… would the 2016 ‘final average salary’ probably be the best three in ten at the time of break in service, rather than the ‘revalued’ salary shown on my statement today? Sorry for all the questions. Many thanks again!
@dtravels TPS are very reluctant to do the calculation - I must see if I can knock up a spreadsheet that will allow you to to get a rough idea of the values at the time.
The Government did say, in response to the consultation, that the new RSS (not the current "rollback" but the new "remediable service statements") would include hypothetical calculations - but I will only believe that when I see it.
The problem with comparing the 2016 salary to your current best 3, which most likely come from 2014-2017, is that the latter have a lot of inflation added to them.
To get a rough idea of what your "target" from 2016 will be just look at what you were actually earning back in 2016. The final average salary will be a bit higher than that figure.
As your current best though still includes nearly 3 years from that period it will easily exceeds it, the problem is that as you move forward and those 2014 to 16 years get to old to be used your final average salary will fall....so what you want to do is compare your target to the years that will still be inside the 10 year window on the date you intend leaving...so if you are going to teach until 2030 then look at the revalued 2020-2024 years. Those will grow with inflation so do stand a good chance of overtaking the target.
Thank-you once again: it's confusing, but slowly makes really good sense the more times I read it, thanks to your detailed answer. To make this even more nuanced (and risk overstaying my welcome in these comments 🙂)...
1. I can see that my 2016-17 break in service also included a reduced salary (0.8pte) in the final four months before the break, but hopefully this will not matter as it's the best three in ten at that time?
2. I also had another break in service a month or two later in late 2017; I assume this would just make the first break the less favourable evaluation point (based on 3 in 10) and therefore the first break would simply be ignored in the final calculation of pension benefits?
Many thanks again!
@@dfountain
@@ahowardtravels Part time employment doesn't affect the "final average salary" because this calculation uses the full time salary figure - just make sure that the "annual salary" amount IS the full-time-equivalent amount!
Where you have two breaks you get two hypothetical calculations, whichever produces the best pension is the one that will be used.
Hi David. I know there have been lots of question and I do appreciate your time and effort here - I am kind of in the abyss in terms of knowledge about pensions. I am due to step down from Deputy at the end of this academic year. I started in the scheme in September 2001. I will take on the role as Assistant Head from September with a significant pay decrease. It might be worth knowing that I have been DHT for the past 4 years and, prior to that, AHT for 10 years, After watching this video, I plan to take a break until September. Do you think this is wise? Many thanks!
I'd really need to see your full service history to do the maths but you would only need a break of a single month, you don't need to stay out of the scheme until September.
I'd also say that it is very likely that your "Method B" is currently the best, and in this case it's worth checking what years are being used in it. Unless you've been moving up a pay range then it is likely that your best years are 2019-2022 as these DHT years will get the most benefit from this year's 10.1% inflation figure. If that is the case then you don't actually need a break at all until 2029, that is just before the 2019 salary becomes too old to be used. Taking a month out whilst you are still on your DHT's salary would mean sacrificing more from the CA pension than if you took a month out upon starting that new lower paid post.
Hi, it took me a while to get my head around this and I think I have finally got it. However, I’m a bit worried that I might have missed the boat as my current forecast downloaded today from tps says my best calculation uses method B and takes the 3 years from Sept 2014 to Sept 2017. I thought this gave me time to put in a month break but, reading another comment, am I right that the statement might not be up to date? In that case maybe I have missed an opportunity.
You are fine. All months before 2023 get the same inflationary increase and this maintains the relative values and as such your older months, from earlier in 2014, cannot "overtake" September 2014 and later. This means you have plenty of time to take a break to protect Sep 14 onwards.
Thank you, that is reassuring. I will put in the one month break now to protect that period. Thanks for all your help.
Do you know if the one month break also works under the NHS 1995 scheme?
I'm afraid I don't know.
This is published on the TPS website and as the Act referred to is not specifically about the TPS I suppose there might be equivalent names or interpretations of it in other public sector schemes:
"Hypothetical calculations were introduced by the Pensions (Increase) Act 1971 to members who, after completing sufficient service to qualify for retirement benefits, had a break in pensionable service and then at a later date returned to pensionable employment."
This applies to me. I have taken out life insurance to cover the death grant payment I forfeit when taking a break. My only concern now is whether there might be a delay in my employer putting me back into the pension scheme following my one month break. I don't want to end up with a 6 month break! Do you now whether this is a real danger or how to avoid it please David?
The rules of the scheme are clear, the employer MUST enrol you from the 1st day of the next month after receiving your instructions to do so. Keep a paper trail by completing the form on the TPS website and emailing your employer telling them of your intention. Schools are allowed to retrospectively correct and take deductions for the pension so there should be no problem. Don't let them fob you off if they do make a mistake and try to delay reinstatement.
Thanks David
One more question. As we’ve just had a payrise, should I wait until next September before taking a break. I’m just wondering whether splitting this year’s salary might be a mistake. When a break is put in, can the pension calculation be based on just the one final year before the break or would it be the best 3 of the last 10 before the break?
It is based on the better of either the Method A or B.
However, the pay rise is NOT going to overtake Method B...the pay rise was 6.5%, and it doesn't get that in full until it's been paid for a full year, that being to the end of August 2024, whereas the Method B is going to get the inflation increase of 6.7% 5 months earlier than that in April 2024.
Thank you@@dfountain. I've taken the one month break as I am about to lose my best 3 in the last 10. I wish I'd known about this a few years ago because I think it would have been even more beneficial then. I've taken out life insurance to cover the death grant and will stop paying it once I rejoin the scheme. I may lose £70 per year in my pension if teachers pay improves over the next 6.5 years. However, that doesn't seem like something I'd be unhappy about as it will mean teachers pay has increased and my pension will be better than currently forecast anyway. So thank you again for this advice. I'm looking forward to seeing the inflation being added to my method B in February - April and seeing how much better it's looking then.
I’m 25. This is only my 3rd year working, 2nd year as a teacher. I want to learn more about this but I’m so confused. What are the calculations? Don’t they automatically put a certain amount of our pay into the pension? Why does it matter what our average pay was for the calculations? Isn’t it all in the pot anyway? This is so confusing haha
A lot of the more complicated calculations you can ignore as you won't have any service in the final salary schemes. This video is only relevant to such schemes...for you I suggest you take a look at this video: ua-cam.com/video/kJpS3lS3h10/v-deo.html
The CA scheme is far (FAR) simpler and has a lot less tricky parts to it...though do be aware of the 5-year break rule as this can have a significant impact if you have built up a pension before taking such a break and then return for a longer period.
Hi David I’m currently on just over £60k but as a result of taking a salary sacrifice for a cycle to work scheme TPS has my salary as £58147. This will be settled by May this year. I’m 58 and want to reduce to a .80 timetable for a year before beginning phased retirement. Should I take a break to protect my FS? I’ve been teaching since 2004. Thanks in advance.
Firstly you need to get them to CORRECT your salary as recorded for the pension. A salary sacrifice should not be taken off your reported pensionable earnings for several sacrificial options, including the "cycle to work" scheme: www.teacherspensions.co.uk/employers/managing-members/contributions/types-of-contribution.aspx
Then you need to check what your best 36 months are on your statement, if they include 2014 then a month out soon may be prudent. However, just because you are dropping to 0.8 does not take your "final average salary" down with it (unless you are also dropping a TLR or down a pay scale), because it is the full time EQUIVALENT salary that is used in this calculation and not what you are paid.
Also note, that if you intend taking phased retirement you have to drop to 80% of the previous year's salary AT the time you take the phased pension. Dropping to 80% this September but not wanting to take phased retirement until the following year would therefore mean dropping to 0.64, or lower, in September 2025.
So if my peak was back in 2019 can I pause now and lock that in? Am I right that I have until 2029 to pause?
If the 3 years were 2016 to 2019 then you have until 2026.
If they were 2019 to 2022 then you have until 2029
Thanks so much- excellent advice.
Does Maternity act as a break?
No. Part of the protection to new mothers is that maternity counts as continuous service (up to the year) so that they cannot be unfairly targeted for redundancy. In addition, whilst on maternity pay, you are adding the full amount of pension as though you were still working - even though your contributions could be less.
@@dfountain Thank you David. I’m going back part time so I will definitely look into taking a break from paying it as I’m dropping my leadership responsibilities (and pay!)
Great. Best place to start is with your statement. It will tell you what your current best "final salary" is based on. If it is Method A then a month out as soon as you return may be advisable. If it is Method B then check the dates involved, you will have up to 10 years after the starting date before you actually "need" a break. Download and save the one before you return on your new pay level as this will have your "salary" at the date you leave. You can then use this in the future to determine if you need another break or not.
@@dfountain Thank you! I don’t think I’ve ever seen my pension statement so I’ll look into finding it! I’ve been teaching for 8 years so hopefully been building up!
teacherspensions.co.uk - it is simple to sign up and get access to it.
Hi David
Not sure how to contact you direct but simpleish q maybe
Made redundant in sept 2021 at age 53 after 28 years teaching
Last ten years teaching salaries approx 48K,48,49,49,49,50,51,51,63,63
After six month break I have started teaching again on salary of 40K on a 6 month contract which may extend after sept 2022
Likely to retire at 55
Have opted out TPS as I am concerned it may impact on my current calculation which is Method A ie last 12 months
After six months ie in Sept 2021 I may carry on teaching for another couple of years or not return to teaching and do something else
Any thoughts or advice v much appreciated as TPS only confuse me when I call?
Want to safeguard my current Method A
My blog is dfountain.co.uk and contact details are there.
Firstly there is no need to worry about the effect on your pension any more. The break you have will protect your pension completely and so you can opt back in and add to your pension quite safely. The only thing that will worry and annoy you from this point on though is that the benefit statement TPS will produce will completely ignore the calculation that is forced by your break in service/opted out period and so your final salary pension will "look" as though it is going down. TPS refuse to include this calculation on the benefit statement by claiming that it depends on your future salaries, which, IMO, is a complete cop-out! i.e. as soon as you opt back in your Method A will drop drastically but it will always be used in the calculation to the start of the break.
Now, there is something in the proposed legislation that will allow you to reinstate those missing months if you can tell TPS that the reason you opted out was because you didn't want to be in the career average scheme. Clearly being concerned about the effect on your final salary pension would be such grounds in my opinion. You would need to pay in the missing contributions and I would suggest you work out whether it's be worth it or not for you. As your method A was your best at the time you finished it is unlikely to be the case unless you were to carry on working for a few more years and your method B from the time was fairly close to it then.
@@dfountain Massively appreciate the help- Thanks for confirming that the break/opt out was the best way forward although I am still a bit paranoid about taking a lower salary and paying more TPS incase they remove my Method A current figure
This factsheet from TPS may help@ www.teacherspensions.co.uk/-/media/documents/member/factsheets/applying-for-retirement/hypothetical-calculations-v1-april-2019.ashx
But I suspect you will want to message TPS directly and get them to confirm that your hypothetical calculation to the date of the break WILL use your final average salary - specifically the Method A - that was applicable at the time. Nothing wrong with being cautious.
Hi Dave
this is really great info - I have not paid attention to my teachers pension until now and am learning a lot from your videos - thanks for taking the time to make these - it is clear from reading the comments that it helps a lot of people.
I'm 51 and started in 1998 with no breaks. My best actual salary was in 2018/19 and has dropped a little and stayed the same since then although my statement shows my revalued salary has significantly higher amounts from 2013-19 and method B uses values from 2014-2017.
I wonder if I should have the one month break now to protect these amounts for my FS portion I can take in 9 yrs and whether that will also help my CA part to take when I'm 65 (I'm doing AAB buyout) and will probably stay to 65 (or will this period be too far from 65 to be counted?)
My salary has not changed since 2019 and is unlikely to change for the rest of my career (and I would think not beat any inflation at the moment!)
I'm also not sure what to do with the FS portion at 60 - take it one month early to miss abatement and carry on full time or to take phased retirement at 60? Does the phasing and reduced salary from 60 to 65 affect the future CA part? Seems crazy to leave the FS pension and lump sum sitting there doing nothing for 5 yrs but what's the best way to make use of it ? Are there any other options I'm not aware of ?
Thanks for your awesome work!
Yes, a lot of tricky parts to this, not least because you are 9 years away from 60 and that's a lot of time in which to add to the CA pension.
Taking a month out before your 2014 salary starts to drop off would seem to be a sensible precaution.
As for taking the FS pension before 60 to sidestep the abatement question it's a lot trickier for those, like yourself, who would have to commit to taking a large proportion of the CA pension at the same time. The FS pension though will be, at most, 24/80ths of your salary and as such you may have sufficient headroom between your salary at that time and the limit that will be imposed. Especially if you were to consider moving to a part time role at that time. However, that is a long way off and so it's probably just worth keeping it in mind and considering again if you have any breaks in employment after you reach the minimum pension age.
@@dfountain thanks for your quick reply - I will definitely look at that - would I lose the AAB buyout election if I take a one month break and then restart as it was a one time offer to do it in 2015 ? Thanks again for your wisdom!
The Early Buy Out option is going to be re-offered from October since the McCloud judgement effectively restarts the 6 month clock.
@@dfountain excellent, thank you!
Hi David
Thank you so much for your videos they are so so informative. I have a question , my best years in my pension statement are 01/09/2014 - 31/08/2017. Following your really helpful information I intend to take action now to opt out for one month from the TPS to lock in these best years before September 2024. Am I correct in assuming that once I opt back in to the TPS , the years after 31/08/ 2017 - 2022 are still included when calculating my final salary scheme . And the years after 2022 only impact my average salary ?