When deciding on retiring early and the Teachers’ Pension
Teaching is not one of those professions where it is easy to bide your time into old age. There is little option to gently fall to sleep in the corner and wait for your normal pension age (NPA), especially since this has now extended into the late 60s for men and women. Dealing with young people takes energy and resilience, and some tenuous grasp on what it means to be born in the current century.
With all this in mind, you may have thought about early retirement. It requires us to ask what retiring early, and the teachers’ pension mean for us? What option do I have? Here we guide you through the different decisions you can make.
You can leave teaching and keep your pension where it is. The value of your pension will rise year by year, as it is linked to the Consumer Price Index. In other words, a percentage amount is added each year to account for the increased cost of living.
By choosing to do nothing and claiming your pension at the normal pension age (NPA) will avoid actuarial reduction. This is the reduction to your annual pension because you are claiming the pension for longer, and because you retire early, you are said to live longer. The fruits of a stress-free life!
Take the pension
The second choice is to take the pension and face the consequences of the actuarial reduction. It would be best if you were 100% sure that your current status allows you to receive your pension, as you must resign from your post to take your pension. If you resign without knowing your pension status, you could end up with no income! This is one of those times a financial advisor is essential, if only for your peace of mind.
Remember, by taking the pension, the lump sum and the annual pension payments will be reduced. Therefore, you also need to know if you can afford this reduction.
Nothing is stopping you from taking up the option of additional service employment. If this is as a teacher, you need to make sure it does involve you being enrolled in the CARE pension scheme. This is one of those times for an advisor again. However, if you choose to work outside the teaching profession, then by choosing to take your pension you have reduced the pressure to maintain long hours at work.
There is a way to make teaching into old age more manageable, and this is through phased retirement. Anyone with any common sense and knowledge of teaching knows it is not desirable to have aged, tired, unwell, and slightly grumpy demographic in the staffroom. Therefore, provision has been designed to help make it appealing for all. You can reduce your hours by at least 20% and then take 75% of the pension and the lump sum, and you do not have to resign. The main issue here is that it must be done in agreement with your school and needs to fit into their staffing plans. However, there is every possibility that they would welcome the chance to work with you.
The content in this article was correct on 2nd January 2019. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on your status and early retirement. Please use the contact form below to arrange an informal chat with an adviser and see how we can help you.