Adding to your pension may be an excellent way to secure your financial security in later life. It is also a good way to protect your family, whether you become too ill to work or die in service. Increasing your fund with a scheme such as Faster Accrual could lead to greater financial security in retirement and in challenging life events.
What is faster accrual?
Faster Accrual is only available to those in the Career Average arrangement of the Teachers’ Pension Scheme. You may have transitioned to the Career Average arrangement, or if you were a new starter after 2015, you would have been enrolled into this version of the Scheme.
Faster Accrual allows you to elect, or apply, to increase your rates of contribution. The standard accrual rate for Career Average members is 1/57th. By paying more into the Scheme, you can reduce this rate to 1/55th, 1/50th or 1/45th of your average salary throughout your career.
How does faster accrual work?
Each year you earn a pension based on your salary. For instance, if you make £30000 and you are on the standard rate of accrual, you will add £526.31 to your pension fund (£30k x 1/57th). To build up this fund quicker, you can opt to pay additional contributions. For instance, a person on the same salary but with an accrual rate of 1/45th would end up with a further pension build-up of £140.36.
You need to be sure that this is an increased contribution rate that you want to commit to, as it is a long-term commitment. You may wish to consider the pros and cons of choosing faster accrual with an independent financial advisor. The advisor may be able to help you balance the reduction in income now with the increased security once you claim your pension.
The content in this article was correct on 23rd May 2021. 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.