Calculating the value of your pension
The change in pension schemes for teachers has made it complicated. There is the final salary scheme, and there is the career average scheme. If you have been in pensionable employment on or after 2007, your average salary will be selected from the best of two options.
Option 1: Your full-time equivalent salary averaged out over the last 12 months of your service.
Option 2: An average of the best three revalued years salaries of the last ten years of pensionable service. This will then be revalued using the consumer price index.
If your pensionable employment began before this date, then your pension will be the average of the best salary over any 12 months in the last three years of service before you left.
The impact of deferment
If you take a break in service and have worked enough years to qualify for a pension, then retirement benefits are calculated using your average salary at the point of your break. The benefits will then be adapted to match current day values. The valuer will compare the benefits calculated in the normal way to this adjusted value and will choose the better of the two options.
If you return to teaching and your salary at retirement is lower than at the time of your break, then only reckonable service up to the break is used. This is called the restricted hypothetical.
An easy takeaway
The content in this article was correct on 28th June 2019. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.