When you come to check your pension fund on My Pension Online, you might find that there are two sets of figures listed. There will be money held in a Final Salary arrangement and some in the Career Average. Equally, depending on when you started your career, you could have one or the other listed.
Knowing what arrangement you are in is more than changing the calculation of your final pension. The arrangement also dictates the consequences if you opt-out of the Scheme and what additional pension you can purchase.
Here we explain each arrangement and some of the consequences of being in this arrangement.
Final Salary Arrangement
The final salary arrangement is split into two sections. Some joined the Scheme before 2007, where the normal pension age is 60. Some joined on or after January 1st, 2007, whose normal pension age is 65.
Here the pension is calculated from the best three consecutive years in the last 10 years of your career. In the final salary arrangement, you can only buy an additional pension in lumps of £250. Other means of topping up your pension within the Scheme are limited to the career average arrangement.
Career Average Arrangement
Any teacher joining the Scheme after April 1st, 2015, will be enrolled into the career average arrangement. Here your pension fund grows throughout your career, and you receive 1/ 57th as your pension amount.
Members who were in the final salary scheme may be protected and so stay in this arrangement. However, most transitioned from the final salary arrangement to the career average. If you transitioned, you would have amounts in both arrangements, as shown in My Pension Online.
What does this mean for me?
Knowing whether you are Final Salary or Career Average can inform many decisions about your pension. It might impact a decision to have time away from teaching and dictate your normal pension age. Knowing whether you are a protected, tapered, or transitioned member also influences the end pension you will benefit from.
Before deciding to take time out of teaching, purchasing more pension or the timing of your retirement, you should speak with an independent financial advisor to consider the impact on your finances.
The content in this article was correct on March 28th 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.