The services and information provided by the Teacher Pension Scheme feel comprehensive and transparent. It is easy to assume that you can quickly act on the information provided. However, the Teacher Pension Scheme is not permitted, by law, to offer you financial advice. The information provided explains the regulation but not whether you should opt to make any decision regarding your pension.
Consequently, there are some key reasons why you should approach an independent financial advisor about your Teachers’ Pension. Here we explore some of those reasons.
Some decisions are complicated.
Some of the consequences of choices that can be made with your pension are complicated. The idea of a hypothetical calculation can be defined for you by the Teachers’ Pension Scheme, but you may need an independent financial advisor to unpick this with you. Indeed, it is noted in the literature provided by the Scheme that you should do just this.
It might not be a good value for money
At first glance, it is difficult to understand if you are going to be getting value for money. For instance, you may be looking to Buy Out years on your Career Average arrangement. Understanding that you can reduce the pension age from 68 to 65 sounds sensible. However, knowing if it is worth the money for what you receive when you retire is another matter altogether. A lot is based on the stage of your career and when you hope to retire.
There may be negative ramifications in the future
Making a decision, such as opting out of your pension, might feel like a favourable decision in the moment. However, opting out has many ramifications for your future prosperity when you retire, as well as the benefits your family would enjoy if you should die in-service. Opting out and becoming a deferred member for less than five years may be manageable but extend beyond five years and it becomes a disqualifying break. You will need to speak to an independent financial advisor to explore if this is a consequence you would want to accept.
A pension is essentially a long-term savings plan for your retirement. You pay into this savings plan, but so do your employers. You also receive tax benefits thanks to the way your contributions are collected. Therefore, decisions about your pension have significant consequences that deserve full consideration. An independent financial advisor is legally permitted to advise you on the best options for you, which the Teachers’ Pension Scheme is not.
The content in this article was correct on 22nd January 2021. 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.