Hi David, Big fan of yours and have used this to help me decide to opt for 1 years worth of buy-out. I have just received a confirmation letter from TP which states: "* Please be aware that although you entered career average on 01/04/2022 the deductions don’t start until 01/04/2024 and arrears are not due as you are affected by Transitional Protection." So the too good to be true offer and grammatical mistake have also been stated to me, fingers crossed they are true to this offer of an additional 2 years at no extra cost.
Hi David, I have just had this response from TP - 'Yes, it would eliminate the reduction of retiring at the age of 65. As our elections team would have to take into account Transitional Protection, you will be issued correspondence that confirms the amount that would need to be paid, including retrospective amounts and you will have an opportunity to tell us whether or not you still want the flexibility' - seems to imply there are retrospective payments
Thank you, that is interesting and contrary to what has been in the letters sent to those who have applied. I have seen 4 such letter so far and they are all pretty identical...though some have had the spell check applied!
Hi there, I'm 42 and hoping to take an early retirement. I began my pension in 2004 so have both pension parts. Am I right in that if I decide to take CA from 2022 up until retirement, it is a good deal to pay for the 2 years of buy out? Could I then stop paying it and still benefit later when I retire?
Hi David My partner has just received her confirmation letter and as with others it states: "* Please be aware that although you entered career average on 01/04/2022 the deductions don’t start until 01/05/2024 and arrears are not due as you are affected by Transitional Protection." However one thing I am not clear on is the following part, where it states: "Your election to Buy Out the actuarial adjustment on your career average benefits represents a value of £829.92" What does this actually mean? I don't understand what this value is. For clarity my partner is currently 56 and plans to retire in the next few years, but would not be drawing the Career Average Pension until she is 65. So the pension will just sit there until she is ready to draw it.
I’ve posted this in the Facebook group also. My husband has applied for this and first deduction will be later this month. He is 53 and buying out 2 years so we were expecting the extra pension contributions to be 1.8% (0.9% x 2) but the letter says 1.78% so it looks like they are using the figures for the age he would have been on 1st April 2022 (51) so 0.89% x2. So it does seem it’s backdated and costing less than expected.
Yes, the question though is whether he will get the BENEFIT applied to the amount of CA pension he added from April 2022 through to when he starts paying this 1.78%. Does he have a letter similar to the one in the video and does it state that they will not be asking for "arrears"?
@@dfountain His letter is the same, except his says “affected” not “effected”. Definitely states no arrears to be paid. Is there a way of finding out for sure that the benefit is backdated? I can’t talk to the pension for him and he’s a head so definitely no time to be on hold with the TPS.
@@user-pn7ct8lh4p Excellent, that gives me some reassurance in that it means this is much more likely to be a standard, and importantly "checked", communication. Did he opt for the Buy Out previously when he was first put into the CA scheme, back in 2015 that is?
He did but stopped after about a year. His October letter mentioned that he had flexibilities purchased in the transition period and that he would be required to make a choice at some point but no news yet. His Business Manager, who handles all the pension stuff, passed the buyout form on to an HR person at his LEA to fill in the salary details and they then sent it on to the TPS. Only took a week or so but I suppose it could take longer now as there’s less time to the deadline.@@dfountain
I applied using the paper form and received the same letter with effected updated to affected. The age used in the calculation is my age on 1/4/2022. I did not previously opt for Buy Out. Thank you for the videos David. Q1) What does this mean "Your election to Buy Out the actuarial adjustment on your career average benefits represents a value of £1,622.53"? Q2) Do I need to use the same paper form for AP (lump sum) and FA (next tax year)? I tried the online form and it stated "Flexibilities limit exceeded. No options available." A colleague tried and received the same notification. @@dfountain
3.3.24. Had the Buy Out letter through- the spelling error (effected/affected) has been amended but the messaging is the same - arrears are not due as you are affected by Transitional Protection. Buy out accepted from 1.4.22
I’m 50 years old and aiming to retire at 57. I’m likely to opt for my contributions during the transition period to count towards the FS pension. So I’ll have the years from 2022 - 2030 contributing to the AC scheme. How much benefit am I likely to get from buy out please David?
I think that was great. I am sharing in school. I sent tps a paper form back in April 2022 exerting my right to have buy out on entry to the new scheme. Just in case. Chuffed that this may happen. I am going to as my IFA wife to check and will get back to you FYI. Thanks Dave
David thanks for all your hard work. I finished full time teaching in July at 55 (Secondary Yer Head) and intend to take my Final Salary in April 25 at age 56 4 months. Q1 To my understanding waiting for the new tax year mid April 25 will allow for yearly increase on both Pension and Lump Sum or does the annual increase actually get worked out monthly when you choose to take your Final Salary Pension? I have only really been thinking about Final Salary at this point with McCloud as Career Average is a long way off. It looks like I could buy up to 3 years which i think wold take Career Average to 64 in my case. I am now doing cover teaching when not travelling :-) The lifestyle choice but my Career Average makes up only the two years from Final Salary Scheme finish then stops. Its a small part of the Overall Pension. I had thought the Buy Back was to buy the 2 years CA and move to FS which alas I think is not the case. Q2 In your opinion not advice how would i go about paying in the Buy Back as not in Full Time Employ? Many thanks in advance Katya
The annual increase is worked out monthly. Go in May and you will get 1/12th of that year's increase applied to the pension and lump sum...go in March and you get 11/12ths etc.
Hi David. Thanks for another interesting video and for keeping a look out on behalf of teachers. I’ve managed to sort a one month break and to re-enter the pension scheme, without any hassle, based on your previous advice. Regarding the early buyout, I can’t seem to download the paper application form. I click the link and get sent to another page. When I click the link on this page it sends me to the previous page.
Many thanks for this. I will do this probably just for the minimum 1 month (assuming that is possible) just to get the free period. Not convinced that it is that worth it otherwise compared to investing in ISA or sipp etc. Looks like they take a while to set it up if they are not going to be charging that member who sent in the letter until 1st March. Presumably if you send in the form closer to the deadline they would probably not start charging until 1st May at the earliest- giving a longer free period ?
That may well be the case but I still have this nagging suspicion that they aren't going to apply the improved reduction factor to the period from 1 April 2022 to when you start paying for it.
Ok, so I think I've got it, but just want to check before I bite the bullet and apply. I'm 56 and plan to retire at 60 when I will take my FS but leave the CA alone. Thus I would only get my full CA if I didn't take it till 67. However, there appears to be a freebie opportunity of potentially getting the full whack at 65 (or earlier?) by joining the buy out before the end of March, because just by buying 1 month of buy out, you are getting the past 24 months for free, so 2 months gives you 26, 3 months gives you 27 etc. Is that right??? How much extra would I have to pay per month? Who works this out? Do I need to tell them how long I intend to stay in the buy out? How many months do you need to stay in? Just 1?? I also need to take a month out of the scheme before September to protect best 3 years, so presumably when I do that, it would be the end of my buy out? So my plan is to join the buy out next month, do it for 4 months (which will give me 28 in total??), then take my 1 month break and probably not rejoin the buy out when I return. I would then get my full CA pension if I take it at age 64 years and 8 months?? Please @dfountain or anyone else, could you tell me if I've got this right?
There is some stuff in this that seems too good to be true, so it may not work out at all as I have posted. You should only get the benefit for the period of time you have paid, now we hope that we are going to get this period from April 2022 to March 2024 included but that isn't certain. If you pay for 4 months and then stop then you may get 2yrs+4 months, or just 4 months...but you won't get the benefit applied to the amounts of CA you add AFTER you stop paying for the buy out.
Thank you David. I need to take a month break before September so wondering what order to do things. If I were to take the month break in February, then start the buy out in March, would you suspect that I would be giving up any chance of getting the “free” 24 months added?? As I would have had a break??
Thank you for this David. I’ve been trying to get my head around the way buyout works to understand if it is worth it. Please, is the following correct or not in your view? I think the way buyout works is that if you want to buy out say two years (to avoid a reduction caused by retiring early, say 65 rather than 67) you have to have a calculated deduction taken from your salary every month (about £150 I think) and it is only these months for which you are making the payments that the buyout applies. This is because the way it works is that your age is only treated as being two years older for the months/years you have paid this extra buyout. So, if you want to get your age increased by two years for all your average salary pension (noting that it only applies to this and not the final salary pension), you would have to do this for the whole time you are in the pension scheme and not say just in the last year. When I did a rough calculation (I am 61 now and thinking of buying out two years) I would have to wait for a long time beyond retirement (maybe 16 years or more - not including an inflation) before I would get back more than the cost of buying out the early retirement reduction (about £150 a month).
Yes, the payback period is a lot longer. The average life span will get back more than they put in, but the value is more about the index linking that gives you more security. If this option not to pay for the buy out for the two years is genuine then the pay back period is very short for someone who pays in for just a few months!
Hi David. Is the cost of buy out tax deductable? Would this make it better value for a higher rate taxpayer? Also if I have a npa of 67 i think i can only buy out a maximum of 2 years. So if i buy out one year, how do the "free" 2 years work (do i get 3 years) ?
Another great video. Many thanks. I am currently 52 and 8 months and plan to retire at 59 with my career average retirement age at 67. Would this be useful for me? I currently earn £53,000 approx. I have done the hypothetical calculation requirements so I will only use the career average section from 2022 to 2030.
Hi David, I’m looking to retire at the end of Feb or March, I’ll be 59 with 32 years service. I intend taking all final salary except the bit since April 22. Is this something that I could benefit from as I could hold off taking it? I intend taking a days break in service and returning to the same job for the remainder of the year. This is the first that I’ve heard of this. All your videos are excellent as are your contributions to FB Life after teaching page.
If you take the pension BEFORE 60 then you have to take ALL of the pension, final salary and career average. I have my doubts as to whether it is going to be backdated as they state but the risk is very small, so I would probably do it ASAP so that it COULD apply to your 2022-24 period before you leave and take the pension "early". If you are only returning until 31 August can I ask why you are taking a break at all? This is normally something that is done in order to avoid future "abatement" but if you do not intend returning to teaching in a full time capacity after August then abatement is unlikely to have any impact on you.
I had thought taking Pension at 56 was only for the Final Salary, your statement above says different (If you take the pension BEFORE 60 then you have to take ALL of the pension, final salary and career average.) If this is 100% then I understand why and how Buying back the 2 years may help reduce reduction in Career Average. Apologies if i got this so wrong as i have been ignoring the CA until a later date which looks like may now be next year at 56@@dfountain
I'm planning to leave teaching at the end of April this year, but probably not take my teacher pension for 5 or six years by which time I'll be around 65. When l calculate my McCloud figures for this they were actually slightly lower than just taking the average salary 2 years early. If I were to take this buy out option would it lock me in to the McCloud option? If not, any idea how the adjustment would then work for the average salary scheme?
Taking this option cannot affect your McCloud choices. What it means for the CA scheme is that from April 2022 (we hope!) the amount you add to that pension will not have 3% per year that you have bought out reduced. There is a risk that this really is "too good to be true" but if you are leaving in April then applying now should see you pay only a minimal amount and potentially get a good result. If you have a SPA of 67 you could buy out 2 years and that means you can take the CA pension, in full, at 65.
@@dfountain If I am understanding this correctly, this does seem like an opportunity too good to miss. Just to make sure I've got it correct: I could pay just two months of additional contributions (about £70 per month for me) and get to take my whole average salary pension in full at 65 - independent of if I take the McCloud or original split between average and final salary?
@@jonathanmannering7576 if you did opt for 2015 to 2022 as CA then I don't think you will get the benefit of the buy out on that part. But I'd suggest you are risking a small amount for a potential benefit.
Hi David. Thank you for the videos you make - very helpful as I'm a pension novice. I am 49 and have a retirement age of 67. Hoping to retire between 55 and 57. Currently pay the highest tax rate. Do you think it is worthwhile me applying for the AAB Buyout? Thank you for any help.
Hi David - thank you so much for your videos; they have been very helpful. I am planning to retire in April 2024, I was 55 in January - is it worth me applying for the early Buy Out? Should I do this before I submit my early retirement application?
Hi David, sincerely thank you so much for all the help you are giving teachers. I have worked out that will cost me over £5000 to buy out two years for the six years I have left before retiring at 60. Please can you let me know your opinion on an alternative plan without buy out? At 60 I could try to survive on just the final salary part of my pension. I could then leave the career average part of my pension until I reach 67 when it would not be reduced? Thank you.
Thank for replying so quickly. Please can you give me you opinion though of avoiding any buy out, using my final salary pension once 60 and delaying claiming my career average pension until 67? Thank you.@@dfountain
Hello David thank you for all your time and effort you put into these videos. David I will be retiring December 24 aged 63-9month. I have 25-7months in the final salary 60th scheme and of course the rest in CA. My salary is 50k my normal retirement age is 66 in March 2026. I appreciate this is currently a stab in the dark at the moment but is this going to work in my favour or is it not worth bothering about. Thanks
Two things here for you. 1. If it turns out to be true then going for it will be worth while for almost all cases. 2. You should be aware that your final salary pension is immediately payable. Opting out now (in January) will start it on 1 Feb. It would be subject to the rules on abatement however. This may be less of an issue next year if you are leaving on 31 December because it means you would only be receiving 75% of the annual salary. If you are working part-time there is even more of a "gap" that the pension would be allowed to fill.
Hi David. Reading through the comments and watching your videos, am i right in assuming that my partner who started teaching in September 2020 has missed the boat for this as she has always been in the CA scheme and didnt apply in the first 6 months? Thanks in advance
Yes, but in her case there wouldn't have been this potential advantage of getting something without paying for it as that only applies to those who suffered the age discrimination between 2015 and 2022.
As transitional members will have the benefit of "hindsight", being able to see the impact of inflation etc, which has been considerable in the last 2 years, that would appear to be the case. However, younger members were able to enter this same arrangement within the first 6 months of joining the scheme as well. Transitional members will have had two opportunities though but I don't see any other way of dealing with the fact they were illegally discriminated against.
Hi David. My apologies for all of the questions! At present my salary is £46525. My best salary in the past ten years (revalued in 2015) is £46611, a difference of only £86. Am I correct in saying over the next few years they will increase at the same rate? Therefore is it worth me taking a one month pension break? Thank you very much.
Ouch...this is a very common trap you have fallen into. Check the part at the bottom of the Method B revaluation calculation (download the PDF version of the statement) and you will see the revaluation was to LAST April. That salary from 2015 is OWED THIS YEAR's inflation figure. This year the inflation figure is going to be 6.7%. At the end of January that means Method B should now be 10/12ths of 6.7% higher than is shown on your statement, and by April 2024 it will be the full 6.7% higher (note that your current salary is increasing at a slower rate as it is using months from last year still - method A won't get to the full £46,525 figure until the end of August 2024...by which time the Method B will be owed even more inflation...!) £46,611 x 1.067 = £49,733 th-cam.com/video/lgOaMQ4P9pI/w-d-xo.html
Thank you for replying so quickly and so helpfully. In one video you said don’t take a pension break until you have earned the higher salary for 12 months. However, if I can see no way that Method A will ever be higher than Method B, do I still need to take this caution?@@dfountain
Thank you very much for your very clear and helpful reply. It has however, left me in a quandary! You advised listeners to avoid using buy out until you have earned the highest wage for a year. At present I will have to wait until September 2024 to earn £46525 for a year. However the best years for my method B calculation start in September 2014! Do you think that because my method B calculation is so obviously going to be higher than my method A calculation, I should just use buy out in the next few months? Thank you.
@@DuncanThomas-w3e That doesn't sound like something I would say..."opt out" possibly if you are looking to "lock in" a best final average salary. If you want to go with this "buy out" option you need to do so before 31 March. I understand that if you, later, opt out and then back in again you are allowed to re-start the Buy Out from that point, but only if you had applied and started it by 31 March.
So sorry, I meant buy out not opt out! Trying to understand all of the permutations in the teachers pension scheme is giving me a headache! So if my method B calculation is clearly higher than my method A calculation, should I not wait until September before I OPT OUT! Thank you and sorry again.
Hi David,
Big fan of yours and have used this to help me decide to opt for 1 years worth of buy-out. I have just received a confirmation letter from TP which states: "* Please be aware that although you entered career average on 01/04/2022 the
deductions don’t start until 01/04/2024 and arrears are not due as you are affected
by Transitional Protection." So the too good to be true offer and grammatical mistake have also been stated to me, fingers crossed they are true to this offer of an additional 2 years at no extra cost.
Same for me. Thanks David! I would never have know about this without your videos!
Hi David, I have just had this response from TP - 'Yes, it would eliminate the reduction of retiring at the age of 65. As our elections team would have to take into account Transitional Protection, you will be issued correspondence that confirms the amount that would need to be paid, including retrospective amounts and you will have an opportunity to tell us whether or not you still want the flexibility' - seems to imply there are retrospective payments
Thank you, that is interesting and contrary to what has been in the letters sent to those who have applied. I have seen 4 such letter so far and they are all pretty identical...though some have had the spell check applied!
Hi there, I'm 42 and hoping to take an early retirement. I began my pension in 2004 so have both pension parts. Am I right in that if I decide to take CA from 2022 up until retirement, it is a good deal to pay for the 2 years of buy out? Could I then stop paying it and still benefit later when I retire?
Hi David
My partner has just received her confirmation letter and as with others it states:
"* Please be aware that although you entered career average on 01/04/2022 the deductions don’t start until 01/05/2024 and arrears are not due as you are affected by Transitional Protection."
However one thing I am not clear on is the following part, where it states:
"Your election to Buy Out the actuarial adjustment on your career average benefits represents a value of £829.92"
What does this actually mean? I don't understand what this value is.
For clarity my partner is currently 56 and plans to retire in the next few years, but would not be drawing the Career Average Pension until she is 65. So the pension will just sit there until she is ready to draw it.
I’ve posted this in the Facebook group also. My husband has applied for this and first deduction will be later this month. He is 53 and buying out 2 years so we were expecting the extra pension contributions to be 1.8% (0.9% x 2) but the letter says 1.78% so it looks like they are using the figures for the age he would have been on 1st April 2022 (51) so 0.89% x2. So it does seem it’s backdated and costing less than expected.
Yes, the question though is whether he will get the BENEFIT applied to the amount of CA pension he added from April 2022 through to when he starts paying this 1.78%. Does he have a letter similar to the one in the video and does it state that they will not be asking for "arrears"?
@@dfountain His letter is the same, except his says “affected” not “effected”. Definitely states no arrears to be paid. Is there a way of finding out for sure that the benefit is backdated? I can’t talk to the pension for him and he’s a head so definitely no time to be on hold with the TPS.
@@user-pn7ct8lh4p Excellent, that gives me some reassurance in that it means this is much more likely to be a standard, and importantly "checked", communication.
Did he opt for the Buy Out previously when he was first put into the CA scheme, back in 2015 that is?
He did but stopped after about a year. His October letter mentioned that he had flexibilities purchased in the transition period and that he would be required to make a choice at some point but no news yet. His Business Manager, who handles all the pension stuff, passed the buyout form on to an HR person at his LEA to fill in the salary details and they then sent it on to the TPS. Only took a week or so but I suppose it could take longer now as there’s less time to the deadline.@@dfountain
I applied using the paper form and received the same letter with effected updated to affected. The age used in the calculation is my age on 1/4/2022. I did not previously opt for Buy Out. Thank you for the videos David. Q1) What does this mean "Your election to Buy Out the actuarial adjustment on your career average benefits
represents a value of £1,622.53"? Q2) Do I need to use the same paper form for AP (lump sum) and FA (next tax year)? I tried the online form and it stated "Flexibilities limit exceeded. No options available." A colleague tried and received the same notification. @@dfountain
3.3.24. Had the Buy Out letter through- the spelling error (effected/affected) has been amended but the messaging is the same - arrears are not due as you are affected by Transitional Protection. Buy out accepted from 1.4.22
I’m 50 years old and aiming to retire at 57. I’m likely to opt for my contributions during the transition period to count towards the FS pension. So I’ll have the years from 2022 - 2030 contributing to the AC scheme. How much benefit am I likely to get from buy out please David?
I think that was great. I am sharing in school. I sent tps a paper form back in April 2022 exerting my right to have buy out on entry to the new scheme. Just in case. Chuffed that this may happen. I am going to as my IFA wife to check and will get back to you FYI. Thanks Dave
David thanks for all your hard work.
I finished full time teaching in July at 55 (Secondary Yer Head) and intend to take my Final Salary in April 25 at age 56 4 months. Q1 To my understanding waiting for the new tax year mid April 25 will allow for yearly increase on both Pension and Lump Sum or does the annual increase actually get worked out monthly when you choose to take your Final Salary Pension?
I have only really been thinking about Final Salary at this point with McCloud as Career Average is a long way off. It looks like I could buy up to 3 years which i think wold take Career Average to 64 in my case. I am now doing cover teaching when not travelling :-) The lifestyle choice but my Career Average makes up only the two years from Final Salary Scheme finish then stops. Its a small part of the Overall Pension. I had thought the Buy Back was to buy the 2 years CA and move to FS which alas I think is not the case.
Q2 In your opinion not advice how would i go about paying in the Buy Back as not in Full Time Employ?
Many thanks in advance Katya
The annual increase is worked out monthly. Go in May and you will get 1/12th of that year's increase applied to the pension and lump sum...go in March and you get 11/12ths etc.
Hi David. Thanks for another interesting video and for keeping a look out on behalf of teachers. I’ve managed to sort a one month break and to re-enter the pension scheme, without any hassle, based on your previous advice. Regarding the early buyout, I can’t seem to download the paper application form. I click the link and get sent to another page. When I click the link on this page it sends me to the previous page.
www.teacherspensions.co.uk/-/media/documents/member/applications/managing-your-pension/flexibilities-form.ashx
Many thanks for this. I will do this probably just for the minimum 1 month (assuming that is possible) just to get the free period. Not convinced that it is that worth it otherwise compared to investing in ISA or sipp etc. Looks like they take a while to set it up if they are not going to be charging that member who sent in the letter until 1st March. Presumably if you send in the form closer to the deadline they would probably not start charging until 1st May at the earliest- giving a longer free period ?
That may well be the case but I still have this nagging suspicion that they aren't going to apply the improved reduction factor to the period from 1 April 2022 to when you start paying for it.
Ok, so I think I've got it, but just want to check before I bite the bullet and apply. I'm 56 and plan to retire at 60 when I will take my FS but leave the CA alone. Thus I would only get my full CA if I didn't take it till 67. However, there appears to be a freebie opportunity of potentially getting the full whack at 65 (or earlier?) by joining the buy out before the end of March, because just by buying 1 month of buy out, you are getting the past 24 months for free, so 2 months gives you 26, 3 months gives you 27 etc. Is that right??? How much extra would I have to pay per month? Who works this out? Do I need to tell them how long I intend to stay in the buy out? How many months do you need to stay in? Just 1?? I also need to take a month out of the scheme before September to protect best 3 years, so presumably when I do that, it would be the end of my buy out? So my plan is to join the buy out next month, do it for 4 months (which will give me 28 in total??), then take my 1 month break and probably not rejoin the buy out when I return. I would then get my full CA pension if I take it at age 64 years and 8 months?? Please @dfountain or anyone else, could you tell me if I've got this right?
There is some stuff in this that seems too good to be true, so it may not work out at all as I have posted.
You should only get the benefit for the period of time you have paid, now we hope that we are going to get this period from April 2022 to March 2024 included but that isn't certain. If you pay for 4 months and then stop then you may get 2yrs+4 months, or just 4 months...but you won't get the benefit applied to the amounts of CA you add AFTER you stop paying for the buy out.
Thank you David. I need to take a month break before September so wondering what order to do things. If I were to take the month break in February, then start the buy out in March, would you suspect that I would be giving up any chance of getting the “free” 24 months added?? As I would have had a break??
Thank you for this David. I’ve been trying to get my head around the way buyout works to understand if it is worth it. Please, is the following correct or not in your view? I think the way buyout works is that if you want to buy out say two years (to avoid a reduction caused by retiring early, say 65 rather than 67) you have to have a calculated deduction taken from your salary every month (about £150 I think) and it is only these months for which you are making the payments that the buyout applies. This is because the way it works is that your age is only treated as being two years older for the months/years you have paid this extra buyout. So, if you want to get your age increased by two years for all your average salary pension (noting that it only applies to this and not the final salary pension), you would have to do this for the whole time you are in the pension scheme and not say just in the last year. When I did a rough calculation (I am 61 now and thinking of buying out two years) I would have to wait for a long time beyond retirement (maybe 16 years or more - not including an inflation) before I would get back more than the cost of buying out the early retirement reduction (about £150 a month).
Yes, the payback period is a lot longer. The average life span will get back more than they put in, but the value is more about the index linking that gives you more security.
If this option not to pay for the buy out for the two years is genuine then the pay back period is very short for someone who pays in for just a few months!
when will we know if the 'option' is 'genuine' David?@@dfountain
Hi David. Is the cost of buy out tax deductable? Would this make it better value for a higher rate taxpayer?
Also if I have a npa of 67 i think i can only buy out a maximum of 2 years. So if i buy out one year, how do the "free" 2 years work (do i get 3 years) ?
Another great video. Many thanks. I am currently 52 and 8 months and plan to retire at 59 with my career average retirement age at 67. Would this be useful for me? I currently earn £53,000 approx. I have done the hypothetical calculation requirements so I will only use the career average section from 2022 to 2030.
Hi David, I’m looking to retire at the end of Feb or March, I’ll be 59 with 32 years service. I intend taking all final salary except the bit since April 22. Is this something that I could benefit from as I could hold off taking it? I intend taking a days break in service and returning to the same job for the remainder of the year. This is the first that I’ve heard of this.
All your videos are excellent as are your contributions to FB Life after teaching page.
If you take the pension BEFORE 60 then you have to take ALL of the pension, final salary and career average.
I have my doubts as to whether it is going to be backdated as they state but the risk is very small, so I would probably do it ASAP so that it COULD apply to your 2022-24 period before you leave and take the pension "early".
If you are only returning until 31 August can I ask why you are taking a break at all?
This is normally something that is done in order to avoid future "abatement" but if you do not intend returning to teaching in a full time capacity after August then abatement is unlikely to have any impact on you.
I had thought taking Pension at 56 was only for the Final Salary, your statement above says different (If you take the pension BEFORE 60 then you have to take ALL of the pension, final salary and career average.) If this is 100% then I understand why and how Buying back the 2 years may help reduce reduction in Career Average. Apologies if i got this so wrong as i have been ignoring the CA until a later date which looks like may now be next year at 56@@dfountain
I'm planning to leave teaching at the end of April this year, but probably not take my teacher pension for 5 or six years by which time I'll be around 65. When l calculate my McCloud figures for this they were actually slightly lower than just taking the average salary 2 years early. If I were to take this buy out option would it lock me in to the McCloud option? If not, any idea how the adjustment would then work for the average salary scheme?
Taking this option cannot affect your McCloud choices.
What it means for the CA scheme is that from April 2022 (we hope!) the amount you add to that pension will not have 3% per year that you have bought out reduced.
There is a risk that this really is "too good to be true" but if you are leaving in April then applying now should see you pay only a minimal amount and potentially get a good result. If you have a SPA of 67 you could buy out 2 years and that means you can take the CA pension, in full, at 65.
@@dfountain If I am understanding this correctly, this does seem like an opportunity too good to miss. Just to make sure I've got it correct: I could pay just two months of additional contributions (about £70 per month for me) and get to take my whole average salary pension in full at 65 - independent of if I take the McCloud or original split between average and final salary?
@@jonathanmannering7576 if you did opt for 2015 to 2022 as CA then I don't think you will get the benefit of the buy out on that part. But I'd suggest you are risking a small amount for a potential benefit.
@@dfountain Yep, that still sounds like a good deal.
Hi David, thank you for your video! It’s great! Is it worth doing a buy out at the age of 39?
Hi David. Thank you for the videos you make - very helpful as I'm a pension novice. I am 49 and have a retirement age of 67. Hoping to retire between 55 and 57. Currently pay the highest tax rate. Do you think it is worthwhile me applying for the AAB Buyout? Thank you for any help.
Hi David - thank you so much for your videos; they have been very helpful. I am planning to retire in April 2024, I was 55 in January - is it worth me applying for the early Buy Out? Should I do this before I submit my early retirement application?
If it is true that these 2 years are "free" then yes. (But note that I am not qualified to give advice)
Hi David, sincerely thank you so much for all the help you are giving teachers. I have worked out that will cost me over £5000 to buy out two years for the six years I have left before retiring at 60. Please can you let me know your opinion on an alternative plan without buy out? At 60 I could try to survive on just the final salary part of my pension. I could then leave the career average part of my pension until I reach 67 when it would not be reduced? Thank you.
Certainly starting the Buy Out does NOT commit you to having to carry on with it indefinitely.
I would also look at retrospective additional pension.
Thank for replying so quickly. Please can you give me you opinion though of avoiding any buy out, using my final salary pension once 60 and delaying claiming my career average pension until 67? Thank you.@@dfountain
Hello David thank you for all your time and effort you put into these videos. David I will be retiring December 24 aged 63-9month. I have 25-7months in the final salary 60th scheme and of course the rest in CA. My salary is 50k my normal retirement age is 66 in March 2026. I appreciate this is currently a stab in the dark at the moment but is this going to work in my favour or is it not worth bothering about. Thanks
Two things here for you. 1. If it turns out to be true then going for it will be worth while for almost all cases.
2. You should be aware that your final salary pension is immediately payable. Opting out now (in January) will start it on 1 Feb.
It would be subject to the rules on abatement however. This may be less of an issue next year if you are leaving on 31 December because it means you would only be receiving 75% of the annual salary. If you are working part-time there is even more of a "gap" that the pension would be allowed to fill.
have sent you a comment on your website - have a similar letter, thanks!
Great, thank you. Would love to see your letter too.
Hi David. Reading through the comments and watching your videos, am i right in assuming that my partner who started teaching in September 2020 has missed the boat for this as she has always been in the CA scheme and didnt apply in the first 6 months?
Thanks in advance
Yes, but in her case there wouldn't have been this potential advantage of getting something without paying for it as that only applies to those who suffered the age discrimination between 2015 and 2022.
It feels like this only being an option for transitional members feels like further age discrimination against younger staff!
As transitional members will have the benefit of "hindsight", being able to see the impact of inflation etc, which has been considerable in the last 2 years, that would appear to be the case. However, younger members were able to enter this same arrangement within the first 6 months of joining the scheme as well. Transitional members will have had two opportunities though but I don't see any other way of dealing with the fact they were illegally discriminated against.
Hi David. My apologies for all of the questions! At present my salary is £46525. My best salary in the past ten years (revalued in 2015) is £46611, a difference of only £86. Am I correct in saying over the next few years they will increase at the same rate? Therefore is it worth me taking a one month pension break? Thank you very much.
Ouch...this is a very common trap you have fallen into.
Check the part at the bottom of the Method B revaluation calculation (download the PDF version of the statement) and you will see the revaluation was to LAST April.
That salary from 2015 is OWED THIS YEAR's inflation figure. This year the inflation figure is going to be 6.7%.
At the end of January that means Method B should now be 10/12ths of 6.7% higher than is shown on your statement, and by April 2024 it will be the full 6.7% higher (note that your current salary is increasing at a slower rate as it is using months from last year still - method A won't get to the full £46,525 figure until the end of August 2024...by which time the Method B will be owed even more inflation...!)
£46,611 x 1.067 = £49,733
th-cam.com/video/lgOaMQ4P9pI/w-d-xo.html
Thank you for replying so quickly and so helpfully. In one video you said don’t take a pension break until you have earned the higher salary for 12 months. However, if I can see no way that Method A will ever be higher than Method B, do I still need to take this caution?@@dfountain
Thank you very much for your very clear and helpful reply. It has however, left me in a quandary! You advised listeners to avoid using buy out until you have earned the highest wage for a year. At present I will have to wait until September 2024 to earn £46525 for a year. However the best years for my method B calculation start in September 2014! Do you think that because my method B calculation is so obviously going to be higher than my method A calculation, I should just use buy out in the next few months? Thank you.
@@DuncanThomas-w3e That doesn't sound like something I would say..."opt out" possibly if you are looking to "lock in" a best final average salary.
If you want to go with this "buy out" option you need to do so before 31 March.
I understand that if you, later, opt out and then back in again you are allowed to re-start the Buy Out from that point, but only if you had applied and started it by 31 March.
So sorry, I meant buy out not opt out! Trying to understand all of the permutations in the teachers pension scheme is giving me a headache! So if my method B calculation is clearly higher than my method A calculation, should I not wait until September before I OPT OUT! Thank you and sorry again.