Nice video. I'm looking to transfer a private pension into my TPS. Do you know if this transferred amount will still gain the higher 3% tps interest once done?
If they allow you to transfer it in, it has to meet certain requirements, then it should get the annual 1.6% extra on top of inflation each April. Please do let us know how it progresses.
@@dfountain Ty. If I transfer, I will get roughly £200 per year less at retirement age. However, putting it into the TPS pot gains a higher interest rate annually so may offset it. Hard to decide
@@BackgammonisBeautiful The "private" pension, is that a defined contribution "pot of money" and if so how do you assess the £200 per year less? Bear in mind that the TPS doesn't attract an "interest rate" but rather one that matches inflation, so whilst last year the TPS pensions went up by 10.1% there is no guarantee that next year's figure will be similar. Indeed, the inflation figures for July came out this week at 6.8%, dropping from previous months, and the figure that gets used for the calculation is now only two months away (September's inflation figure is the one that gets used). "Pots of money" schemes can do better or worse than inflation so can be seen as more of a gamble. You are also dependent on annuity rates if you are going to compare income levels and there is also the question of "index-linking" and partner benefits to consider. Most annuities that you can buy don't come with fully protected index-linked increases so do check that they aren't capped at a certain level.
@@dfountain thank you. I will receive 700 per year for transferring to teacher pension, but 900 if I keep the amount in the private pension. This is a projection given. However if I transfer to TPS, it will generate more interest over the next 20 yrs.
Very interesting. Is this impacted by the McCloud judgement? In other words, could someone with a SIPP transfer in to TPS and then choose to receive payments at aged 60?
No. The only 'active' scheme is now the career average scheme with the normal pension age that matches the state pension age. The McCloud judgement affects service from 1 April 2015 to 31 March 2022. So, transferring now is only possible into the current scheme. You do raise an interesting point though with regard to those who transferred into the scheme in that period. Something I'll have to delve back into the legislation to find out, and I suspect won't become clear until the secondary legislation is created.
@@dfountain Thanks so much, really love the videos! Could one transfer into the career average (67 retirement), then withdraw benefits at earlier age at a lower rate?
@@70PaulK Yes. At the moment you can access the TP from the age of 55 - as with any pension fund/scheme. This is due to rise in 2028 to 57 and then the plan is to track 10 years earlier than the state pension age.
Hi David. Interesting video, thank you. Did you account for the potential increase in value of that £100K pot over the 12 years before needing to buy the annuity at age 67?
No, for a few reasons. Firstly, I am not a financial expert in general terms, but there are a few things to consider in this regard. Then, the £6k bought in the TP scheme will be increased by inflation each year, and if the teacher was to continue teaching for those 12 years it would get the 1.6% annual bonus on top of that too. That would raise the £6k's "value" in today's terms to just over £7k. Lastly, pension pot investments can go down as well as up - so I didn't factor in either and went for the conservative option of assuming that it would, just, beat inflation. Of course if the investment produced a better than inflation+1.6% return then you'd have a bigger pot in today's terms and so could get more relative to the example I gave. However, with the capped annuity therefore being around half what the TP would produce it would have to be significantly higher than inflation over a relatively short period of time (12 years) in order to do this. One other aspect I didn't cover because there are just too many variables is the actuarial reduction you'd get if you took the TP 'early'. However that would, for comparison, would need me to also look at how annuity rates change for buying them at an equally early age.
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Nice video. I'm looking to transfer a private pension into my TPS. Do you know if this transferred amount will still gain the higher 3% tps interest once done?
If they allow you to transfer it in, it has to meet certain requirements, then it should get the annual 1.6% extra on top of inflation each April. Please do let us know how it progresses.
@@dfountain Ty. If I transfer, I will get roughly £200 per year less at retirement age. However, putting it into the TPS pot gains a higher interest rate annually so may offset it. Hard to decide
@@BackgammonisBeautiful The "private" pension, is that a defined contribution "pot of money" and if so how do you assess the £200 per year less?
Bear in mind that the TPS doesn't attract an "interest rate" but rather one that matches inflation, so whilst last year the TPS pensions went up by 10.1% there is no guarantee that next year's figure will be similar. Indeed, the inflation figures for July came out this week at 6.8%, dropping from previous months, and the figure that gets used for the calculation is now only two months away (September's inflation figure is the one that gets used).
"Pots of money" schemes can do better or worse than inflation so can be seen as more of a gamble.
You are also dependent on annuity rates if you are going to compare income levels and there is also the question of "index-linking" and partner benefits to consider. Most annuities that you can buy don't come with fully protected index-linked increases so do check that they aren't capped at a certain level.
@@dfountain thank you. I will receive 700 per year for transferring to teacher pension, but 900 if I keep the amount in the private pension. This is a projection given. However if I transfer to TPS, it will generate more interest over the next 20 yrs.
Very interesting. Is this impacted by the McCloud judgement? In other words, could someone with a SIPP transfer in to TPS and then choose to receive payments at aged 60?
No. The only 'active' scheme is now the career average scheme with the normal pension age that matches the state pension age. The McCloud judgement affects service from 1 April 2015 to 31 March 2022. So, transferring now is only possible into the current scheme.
You do raise an interesting point though with regard to those who transferred into the scheme in that period. Something I'll have to delve back into the legislation to find out, and I suspect won't become clear until the secondary legislation is created.
@@dfountain Thanks so much, really love the videos! Could one transfer into the career average (67 retirement), then withdraw benefits at earlier age at a lower rate?
@@70PaulK Yes. At the moment you can access the TP from the age of 55 - as with any pension fund/scheme. This is due to rise in 2028 to 57 and then the plan is to track 10 years earlier than the state pension age.
Hi David. Interesting video, thank you. Did you account for the potential increase in value of that £100K pot over the 12 years before needing to buy the annuity at age 67?
No, for a few reasons.
Firstly, I am not a financial expert in general terms, but there are a few things to consider in this regard.
Then, the £6k bought in the TP scheme will be increased by inflation each year, and if the teacher was to continue teaching for those 12 years it would get the 1.6% annual bonus on top of that too. That would raise the £6k's "value" in today's terms to just over £7k.
Lastly, pension pot investments can go down as well as up - so I didn't factor in either and went for the conservative option of assuming that it would, just, beat inflation. Of course if the investment produced a better than inflation+1.6% return then you'd have a bigger pot in today's terms and so could get more relative to the example I gave. However, with the capped annuity therefore being around half what the TP would produce it would have to be significantly higher than inflation over a relatively short period of time (12 years) in order to do this.
One other aspect I didn't cover because there are just too many variables is the actuarial reduction you'd get if you took the TP 'early'. However that would, for comparison, would need me to also look at how annuity rates change for buying them at an equally early age.