You are now aware that as a teacher, you qualify for a teacher’s pension, which is a guaranteed income when you retire. You also know that your pension is a long-term contract that is not normally accessible until age 55 (57 from 2028 unless the plan has a protected pension age).
Here we explore some of the benefits of this pension in a little more detail.
Regular income for retirement
The reason to have a pension is to prepare for a time when you are no longer working. As you are just starting your teaching career, it seems impossible to think of a future that feels so far away. Yet, it is reasonable and responsible to start saving for this time now. The good thing about your teacher’s pension is that your employer contributes to this fund too, and the government takes your contributions before tax.
A tax-free lump sum
When you retire, you have the option to take up to 25% of your pension fund as a tax-free lump sum. The lump-sum could be your luxury cruise ticket or a means of paying off your mortgage on your house. Whatever you choose to use this lump sum for, it is an exciting opportunity at the start of your retired life.
Your family are also better protected when you pay into your pension. If you become ill and cannot work or die in service, there are mechanisms within your pension that offer hope in difficult circumstances. You can apply for an ill-health pension, and your family will receive monies from your pension should you pass away.
Opportunity to save more
While there is a limit on the money you can put into your pension, you can increase your contributions. As there are sizeable benefits to holding your money in your pension, you will want to explore the possibilities with an independent financial advisor. While the Teachers’ Pension Scheme can lay out your options, they are not allowed to advise you. Consequently, it would help if you asked for advice from an independent third party who understands pensions.
The pension offers many benefits, though it is worth reminding you that this is a long-term commitment.
The content in this article was correct on June 30th, 2022. 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.