As you can only submit your form four months before you retire, April is a popular month for teachers to begin thinking about the future. If you are over 55, you could make the leap to leave teaching and claim your pension. If you have reached your normal pension age, you may be considering continuing teaching even though you will be in receipt of your pension.
There are two acronyms, AAB and ASAR, which can influence your decision making as you approach retirement.
Actuarily Adjusted Benefits
Early retirement benefits are paid from the last day of your pensionable employment. To retire early, you will need to stop all pensionable service, and the pension you will receive will be adjusted depending on how early you retire. As you are receiving the pension for a longer time than it was designed or costed for, the amount you are paid each month needs to be reduced.
As a result, you may receive a reduced monthly benefit and your lump sum payment may also be reduced.
Your employer can refuse your application for early retirement, but only for six months. You will be expected to take all your benefits at this time, whether you have a final salary and/ or a career average arrangement.
Additional Service After Retirement
Retirement sometimes isn’t what people imagine. A lot of teachers return to the classroom after taking retirement. When you start back in teaching, your employer will immediately inform the Teachers’ Pension Scheme, whether you choose to opt-out of the Scheme or not. You may be required to complete a Certificate of Re-employment and it is possible your pension benefits will be suspended.
You may earn further retirement benefits when you return to teaching. This is called Additional Service After Retirement (ASAR). You will need to have one or more years of service to qualify for ASAR.
When you return to teaching, deductions will be taken from your salary unless you opt-out. If you work for less than a year, you will qualify for an annuity on the amount you have paid into the Scheme.
The financial consequences of AAB and ASAR on your finances in retirement can be significant. It is a good idea to seek independent financial advice to assess the impact on your lifestyle after retirement.
The content in this article was correct on 28th March 2021. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on your Teachers’ Pension Scheme. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.
