All the talk so far about retirement has been quite serious. The talk about finances, emotions and continuing to work doesn’t make this period sound like any fun at all. But when you leave teaching and you taught before 2007, you will receive an automatic lump sum. Even if you began your career after 2007, you could opt to convert some of your pension funds into a single payout. You will give up £1 of the annual pension for every £12 of the lump sum you receive. It is always a good idea to seek advice before deciding on your lump sum, as your annual benefits will be permanently reduced on making this choice.
Dream a little
It is possible that this lump sum will end up being a six-figure sum, especially if you have a lifetime of teaching behind you. While paying off your mortgage and other debts is sensible, it might be there is an opportunity to use this sum to live some of your dreams too. There are places you can visit or holiday homes that could be purchased. Sitting down and giving some thought to how you can maximise this moment in your life is essential. You might even want to donate some of this money as a gift to your children so that they can set up in life.
Equally, you can invest the money and enjoy the additional earnings this offers you throughout your later life. Be aware, though, any money earned from investments might be subject to tax even though your initial lump sum is tax-free. Many advisors point to the length of time of retirement in today’s world and the potential costs of care in later life. Therefore, before making any choices on how to use your lump sum, seeking advice is essential.
But, before you get too real about the potentials of life, take time to dream a little and to do something to mark this life-changing moment. You have a lifetime of service behind you, and now is the time you might seek to feel some of the rewards of this work.
The content in this article was correct on 29th June 2021. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on the different types of retirement available with the Teachers’ Pension Scheme. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.