As the New Year bell tolls, you might think that 2022 is the year that you change your career. Teaching has always been a challenging career, and the pandemic has cranked up the pressure significantly.
While making a move to a new career might be emotionally difficult, there are also long-term financial considerations. A career change is going to impact your teacher pension. Here we explore some of the points you may wish to consider.
Trying something new for five years
There is a salary link in place on your Final Salary arrangement for five years after leaving teaching. This link is broken after five years, and any new pension accrued in the Career Average arrangement will not include years accrued early in your career. Five years is also a significant amount of time to calculate how much your fund is worth. After five years, your pension accrued will increase by only a small amount compared to those still in-service. If you return within five years, the calculation will stay at the higher figure.
Consequently, when planning for a career change, you might want to consider it a career break. Knowing that the impact on your pension will be minimal in these five years provides an opportunity to try something different for a while.
Moving to another public pension
You can also minimise the impact of your career change by moving to another sector that receives a public pension, such as the NHS. If you make this change, you can take your pension with you, and there will be no long-term impact on the benefits you receive.
If you go into another career with a private pension scheme, your teacher pension will continue to increase based on figures released by the government. This increase in your pension is designed to counter any impacts of inflation on your pension fund.
To fully understand the long-term impact on your pension, you may want to consult with an independent advisor.
The content in this article was correct on 11th December 2021. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on your teachers’ pension scheme, as well as financial matters in general. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.