It is easy to perceive that your pension contributions are another additional expense. The amount coming out of your salary feels a lot, but we all appreciate that a pension in retirement is a necessary evil.
Let’s consider if this is the right mindset when thinking about your Teachers’ Pension Scheme.
Long Term Savings Plan
Current interest rates make long term saving an unprofitable affair. We need a nest egg to enjoy our old age, and getting there with everyday savings is difficult, requiring intelligent investment that comes with risk.
While you might never have thought of it as such, the Teachers’ Pension Scheme is a highly profitable long term savings plan. Not only does it increase each year with indexation, but your employer also contributes to your pension and the pension contributions are taken before taxation, meaning it benefits from tax relief.
When you retire, you will benefit from a lump sum and then payments throughout your retirement. More than this, you will be covered by death benefits that could help to see that your family are supported should you die in-service.
Are you making full use of this scheme?
If we stop seeing our pension as another bill and instead see it as a means of saving for a prosperous future, we also might want to consider contributing more to the scheme. It would make sense to suggest that keeping money in your pension is more profitable than keeping money in a bank.
Before you explore making additional contributions or using flexibilities, you might want to consider that these contributions cannot be retrieved from the scheme before retirement. Therefore, you are advised to seek advice from an independent financial advisor, who will be able to explore the pros and cons of making full use of your pension.
Considering your options
Over the next three weeks, we will explore your options for paying more money into your pension and increasing your benefits on retirement. Understanding these options might help you in your decisions about what to do with any disposable income available to you.
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.
