You might think that starting your career is frantic enough, without having to think about your pension too. In fact, your pension feels a good 40 years or more away, and there are more pressing priorities. However, there are two important dates in your first year of teaching crucial to the long-term value of your pension.
Important Date 1: Buy Out
The Buy Out flexibility is a means of paying more money into your pension and so increase your benefits when you retire.
You will have been automatically enrolled into the Teachers’ Pension Scheme, and contributions will be taken from your salary before taxation. You will be enrolled in the career average scheme and be given a normal pension age (NPA). Unlike your state pension age, which is likely to be 65, your NPA for the Teachers’ Pension Scheme could be 66 to 68 years old.
While you can retire earlier than your NPA, your benefits will be reduced depending on how early you retire. To avoid this, you could Buy Out the years.
You have six months from joining the scheme to decide if you want to Buy Out the years, which means you need to act relatively quickly. The choice to Buy Out is a long-term financial decision, and you may want to speak to an independent financial advisor about the costs and benefits of this scheme.
Important Date 2: Transferring another pension into your Teachers’ Pension Scheme
You may have an existing pension in another scheme, and it might be that it can be transferred into your Teachers’ Pension Scheme. Your previous pension scheme will need to be recognised by the HRMC for it to be eligible, and you may wish to check with an independent financial advisor to see if your pension qualifies.
If you have a pension eligible for transfer into your Teachers’ Pension Scheme, you have 12 months to make this decision.
The content in this article was correct on July 31st 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.