When it comes to answering questions, advisors working in the sector around teachers’ pensions tend to see a pattern of questions they see. From Teachers’ Pension contributions to retiring early, the Teachers’ Pension at 55, to the Teachers’ Pension after death, the financial advisor can face concerns that cover the breadth of life experience. Here we take a look at a handful of the most asked questions, with the briefest of answers.
Is the Teachers’ Pension lump sum tax-free?
The amount you will get as a lump sum is a favourite question of all teachers thinking forward to retiring. This is not at all surprising, as it gives us promise of paying off a mortgage or going on a luxury break at the start of retirement. To calculate how much you will get as a lump sum, you can visit the TPS calculator. This will help you work out the maximum lump sum you can receive – which will come to you tax-free.
What are the Teachers’ Pension contributions?
As well as wanting to know what benefits you would receive, it is also essential to know how much you would be expected to pay. Whether you are full-time or part-time, you will pay a percentage of your salary in teachers’ pension contributions. If you earn up to approximately £27k for instance, you will pay 7.4%, but if you earn over £78k, you will contribute at a rate of 11.7%. It is a good idea to be clear on your expected contributions and check this against your payslip, making sure you are paying at the appropriate rate. These rates are applicable in England, Wales and Northern Ireland. Other pensions could be different.
The Teachers’ Pension After Death?
There is a death grant available to the beneficiaries of those who die while in-service. If you are an active member of the TPS, then you are going to qualify for a payment. The amount you are paid depends on whether you are enrolled in the CARE scheme or the Final Salary scheme. It is a good idea to make this part of your Will; therefore, it is a good idea to seek advice from a financial advisor about how much you will be due.
Teachers’ Pension & Opting Out?
Finally, though not exhaustively, other teachers often show concern about whether they should be in the scheme at all. Generally, the advice is that the scheme is good value for money, and it would be unwise to opt out. However, sometimes life is tough, and we need all the money we can get; therefore, pension contributions seem too much of a burden to meet. This is an area where it is essential to seek advice, as the consequences could be very costly in the future.
The content in this article was correct on 31st January 2018. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on the teachers’ pension scheme. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.