Hi David, this video applies to me. I wanted to take the final salary part of my pension last April but was advised by a financial advisor, TPS and my HT that in order to do so I would have to take a 1 day break in contract in order to opt out (I’m still teaching and over 60). My HT informed me I would have to leave my post and re-apply for it. I’ve spent months trying to get clarification on this as I have read elsewhere that opting out doesn’t mean I have to stop teaching and would mean I could take my pension instead of waiting. Teachers are due to get a pay rise in September 2023: would this have any affect on my FS pension? I’m thinking of leaving next July. Thank you for your time; it’s much appreciated.
ARGHHH!!!!!...right, you probably should open a complaint with TPS and gather the evidence that you were incorrectly advised. They may be able to complete a retrospective opt out in such a case - one other person I am conversing with has been told that is an option if they can prove they were not correctly advised at the time. (I presume you started teaching before 2007) However, if you are working full time then the chances are most of the pension wouldn't be paid due to the rules on abatement. Get in touch with me directly and if you are happy to share your pension statement I can be a little more accurate in the figures that are involved. dave@dfountain.co.uk As for being able to "start" your pension without leaving employment this is most certainly possible. Opting out of the scheme triggers your "entitlement day". Now to the chapter and verse on why this is possible from the regulations governing the NPA60 final salary pension (www.legislation.gov.uk/uksi/2010/990/made/data.pdf) *** Page 119: Case A: retirement on or after reaching normal pension age 2.-(1) Where a person (P) satisfies the condition for retirement, the entitlement day for Case A is- (a) if P is not in pensionable employment on the day on which P reaches the normal pension age in relation to the reckonable service, the day on which P reaches that age, and (b) if P is in pensionable employment on the day on which P reaches the normal pension age in relation to the reckonable service, the day after P ceases to be in pensionable employment. *** You would be 2(b) in this because you are already over 60, the normal pension age and so your entitlement day is the day after you CEASE TO BE IN PENSIONABLE EMPLOYMENT. This last part is the bit most people get confused over. Pensionable employment is NOT the same as being employed, the definition of "pensionable employment" is in another part of the regulations that states, on pages 2 and 3: *** Employment not pensionable: general 7.-...(3) A person who makes an election under regulation 9 (election for employment not to be pensionable) is not in pensionable employment while the election has effect. *** This part clearly states that you can elect for your employment NOT TO BE PENSIONABLE, or in other words you OPT OUT of the pension scheme!
Thanks David, that's a great video. I have a question as this video matches my circumstances but does one have to take a 'pensionable working day' off to trigger the pension and retain the teaching post, albeit for only a few months?
The way to trigger the entitlement day, and therefore the 'start' of the pension is to leave 'pensionable service'. You can do that in two ways once you are 60+. 1) As described here - opt out of pensionable service, i.e. leave the TPS but stay in your teaching post. 2) Become unemployed for a day (or longer) The first requires no agreement with the school, other than their processing of your opt-out request, but the minimum period you can be 'opted-out' for is a month. The second does need you to have an employer who is willing to give you a day's break in service and that brings other issues that depend on continuity of service into play, such as sick pay and redundancy rights. Bear in mind that although the pension will 'start' on your entitlement day it won't actually get PAID to you until you apply for it. I have known teachers unknowingly trigger their entitlement day and then not claim the pension for years - they got a shock when presented with their income tax bill that year. (One I know waited 5 years and had a pension of, in today's value, £20,000. The 5-year total of course was £100,000 and so they ended up losing an awful lot because much of it was then taxed at 40%!). One last thing to consider is that if getting your pension when added to your other income does take you into a higher tax bracket then you can still put more into a private pension scheme. Unlike taking money out of such private schemes, taking the TP does not trigger the lower limit for contributions to a private pension thereafter. Currently the limit is the lower of 100% of your salary, or £40,000. The lower, triggered amount, would have been £4000.
For the NPA60 final salary scheme, this is the point...there is NO UPLIFT. Unlike taking the pension "early" where there is a reduction based on the fact that you will receive extra payments there is no corresponding increase for taking it late.
Hi David, I am a teacher in Scotland and just wanted to Check if this option to leave the pension scheme for a month after my 60th birthday in April would apply to the Scottish scheme. My NPA under the old pre. 2007 final salary scheme. as 60, If possible, I would come out of the scheme for the month, then become eligible for the pension and aim to work three days per week for a couple of years. So my hope is I would get my three days per week pay plus my Final salary element of my pension,.As I say, I’m just concerned that this may not apply to the Scottish scheme. . Would appreciate if you’re able to offer any thoughts on that David. Thank you
The SPPA rules do have some subtle differences and I'm afraid this is one I cannot be certain is the same. You will need to contact the SPPA and ask them what triggers your "entitlement day" for the NPA60 pension - will it be triggered by being "out" of the pension scheme but still employed or is a full break in employment required.
Hi David, thanks for posting these helpful videos. What I am slightly unclear about in this and one of your other videos is that surely a very big difference between early and late retirement is the salary itself (ie if one retires early this salary is not earned)? Or perhaps you are assuming that one continues to work and also claim pension?
Yes, you are absolutely correct if you carry on working then the salary is likely to be many times more than the pension and of course working a year longer both increases the pension (so long as your final salary isn't falling) and results in a lower reduction figure. However, my focus is on looking to see if you can get to a pension figure that can sustain you once you finish working and to realise that once you have done that then carrying on for another year because you don't want to "lose" out on the pension reduction isn't where your focus should be. The pension gives you two rewards. One is the cash but the other is the opportunity to stop or reduce how much you work...it gives you time as well. You can choose to 'spend' that time earning cash from other sources or not and when you consider that if you stop teaching altogether that you get so much time back, and I'm talking about the "real" amount of time that the job takes and not the friendly mickey-taking friend's quote about working 9 till 3, then you can work out whether you need to work another year to put another £60 a month on the pension and increase your savings (because if you aren't increasing your savings whilst on a full-time wage then I'm afraid you probably aren't ready to start your retirement and living off just the pension yet ;) ) In fact, if you have not enough to retire on and are approaching 60 then taking the final salary NPA60 pension 'early' and returning to teaching will give you a significant advantage as in that case you get the unabated pension plus your salary.
@@dfountain Thank you for the detailed reply. That is very interesting and informative. I am 60 this year, have been in the TPS since 1991, and am considering phased retirement (I see you had another interesting video on this). As I understand this you can take up to 75% of benefits for at least a 20% reduction in salary and must remain with this for one year. Can I ask - given the need to reduce salary by 20%, is there any danger of this reducing the pension?
Kind of but fixable. Going part-time doesn't, of itself, reduce the final salary pension because the calculation of the FS pension uses the full-time equivalent salary. However, if you drop the 20% by stepping down from a TLR or other responsibility then it might. In fact even carrying on working can lead to a reduction if your final salary falls...and this is possible even if your wages go UP! Take a look at the video called "The Pay Plateau" where I explain this. The one thing I would suggest you take a close look at is whether you can get your school to agree to you taking a day's break from their employment for a single day before you reach 60. If they will then you can claim your pension 'early' and then have no restriction on what you earn upon your return. One of the issues with the NPA60 pension that you are in is that there is no enhancement for taking it 'late'. It simply doesn't start until you leave pensionable employment. As you are approaching 60 there is one other option open to you. You can start your NPA60 pension without leaving employment once you are over 60. The problem with this is that it can lead to your pension being abated (I have a video on that too called "The Pickpocket Clause"). If you are considering going part-time though then you might find a happy medium where it doesn't get abated.
Can’t you claim the NPA 60 pension in April, continue to pay into NPA 67 pension as you don’t have to take it at the same time if you’re over 60? Then take the NPA 67 pension in September or anytime up until you’re 67.
The problem is that to qualify for the career average pension after you have taken the final salary pension is that you need at least 1 year's worth of contributions. You can qualify for a short-service annuity if you have less than 12 months in the scheme, and I have a spreadsheet on my blog that details how much that would be, but that takes around 20 years to pay itself back.
@@dfountain I’d have two years in the NPA by then. However, I’m not sure if I could get an abatement from April 2024 until September. Probably looking best to go April 2024 with 38 years in the NPA 60 when I will be 60. To be honest that would give me not much short of my take home pay now as I won’t have NI to pay and I’m currently buying past years which will conclude Jan 2024. Can’t see the point in working for almost the same money. Many thanks for all your brilliant videos. Our head sanctioned a £1 pay rise this year as your suggestion.
I am over 60, in the old final salary scheme, and was not planning to retire just yet, however, my school is likely to come out of the TPS by the end of the year. Therefore drawing my pension asap seems the best option. Until viewing your video I didn’t know this was possible, but does the abatement rule still apply?
This is not something I am 100% confident about so I would appreciate your taking this up with TPS directly and letting me know what they say. My gut feeling is that you won't be subject to abatement from the time your school leaves the TPS. The timing of that could be significant because the abatement rule works on the total paid in a financial year. So, if I am right that your salary upon your school leaving the TPS is no longer counted towards the total limit then if your school left this August you'd have less than half a year's salary and therefore have more available to take in your pension. If they aimed to leave on 31 December then you'd be getting three-quarters of your salary - which still leaves a large amount that your pension could fill. The regulation that causes me some doubt is this one and in particular the phrase "comparable British service": 64.-(1) This regulation applies while a person (P) falling within paragraph (2) is employed- (a) in pensionable employment, comparable British service or employment which would have been pensionable The definition of this phrase is this: "service pensionable under a comparable British scheme." In my, completely unqualified opinion, any scheme that your school enters into on leaving the TPS is unlikely to be a defined benefit scheme and should not therefore qualify as being "comparable". The question I'd like you to ask TPS then is this: "My school intends to leave the TPS and start a defined contribution scheme. Would this under regulation 64(1)(a) be considered comparable British service?" Now, there is a second point and that relates to your service from 1 April 2022 through to when your school leaves the TPS. If you opted out of the TPS now (effective May 2022) and start taking your Final Salary pension on 1 May 2022 what happens to your career average pension? Normally on return to service after taking the pension you would have to be in service for 365 more days for it to qualify you for additional pension rather than an annuity. If your school left on 31 December then you won't have added 365 days. How much of a loss staying out of the scheme would be I don't know especially if you are not subject to abatement and would be getting 8 months of your full final salary pension in the meantime!
Absolutely you can. There are only two reasons (IMO) not to. 1 - You believe you final salary will increase between April and August. (The best of Method A or B) 2 - You believe the career average pension you will add in those same 5 months is worth more than the total paid out in those 5 months from the final salary. In essence the ending of the final salary scheme in March 2022 means that the only real benefit of staying in that scheme - being able add more service - has gone. Taking it earlier, say a year or two before you retire is a greater risk as you have more time to get an above inflation pay rise and you may fall foul of the abatement rules.
Yes. To get the final salary pension 'started' you have to be out of "pensionable employment" and over 60, this can be done by simply opting out of the pension scheme. If you were in the TPS before 2007 then you will have some of your service in the final salary scheme and it doesn't matter how old you are. This will still apply in 2024, 2030, 2040...(very few people will have started before 2007 and still be in teaching later than this though)
Hi please can I ask, what happens if you are under 60? I am planning to retire in September but am only 57. Should I stop paying into my pension in April?
Without checking your figures I cannot give an answer with absolute certainty as it depends on what is happening with your final salary. If your best final salary is coming from the months and years that are exactly 10 years ago - which with over a decade of below inflation pay rises and freezes is quite possible - then your "final salary" could be dropping. If that is the case then only working through the figures will tell you the consequences. However, this video is all about those who are already OVER 60 because their payout starts the moment they opt out. This is not the case for those under 60. I would recommend that those under 60 either don't opt out, or only opt out for 1 month, depending on their salary movement. You don't need to have 1 year in the Career Average scheme for it to pay out if you are going into it following your final salary scheme (even with a break of up to 5 years).
![ILLSLICK X YOUNGOHM - We're The same [Official Video]](http://i.ytimg.com/vi/yUJNkobYR0E/mqdefault.jpg)
Thanks David...you genuinely give your viewers value and life changing advice.
I appreciate that!
Hi David, this video applies to me. I wanted to take the final salary part of my pension last April but was advised by a financial advisor, TPS and my HT that in order to do so I would have to take a 1 day break in contract in order to opt out (I’m still teaching and over 60). My HT informed me I would have to leave my post and re-apply for it. I’ve spent months trying to get clarification on this as I have read elsewhere that opting out doesn’t mean I have to stop teaching and would mean I could take my pension instead of waiting. Teachers are due to get a pay rise in September 2023: would this have any affect on my FS pension? I’m thinking of leaving next July. Thank you for your time; it’s much appreciated.
ARGHHH!!!!!...right, you probably should open a complaint with TPS and gather the evidence that you were incorrectly advised. They may be able to complete a retrospective opt out in such a case - one other person I am conversing with has been told that is an option if they can prove they were not correctly advised at the time. (I presume you started teaching before 2007)
However, if you are working full time then the chances are most of the pension wouldn't be paid due to the rules on abatement.
Get in touch with me directly and if you are happy to share your pension statement I can be a little more accurate in the figures that are involved. dave@dfountain.co.uk
As for being able to "start" your pension without leaving employment this is most certainly possible. Opting out of the scheme triggers your "entitlement day".
Now to the chapter and verse on why this is possible from the regulations governing the NPA60 final salary pension (www.legislation.gov.uk/uksi/2010/990/made/data.pdf)
***
Page 119: Case A: retirement on or after reaching normal pension age
2.-(1) Where a person (P) satisfies the condition for retirement, the entitlement day for Case A is-
(a) if P is not in pensionable employment on the day on which P reaches the normal pension age in relation to the reckonable service, the day on which P reaches that age, and
(b) if P is in pensionable employment on the day on which P reaches the normal pension age in relation to the reckonable service, the day after P ceases to be in pensionable employment.
***
You would be 2(b) in this because you are already over 60, the normal pension age and so your entitlement day is the day after you CEASE TO BE IN PENSIONABLE EMPLOYMENT.
This last part is the bit most people get confused over. Pensionable employment is NOT the same as being employed, the definition of "pensionable employment" is in another part of the regulations that states, on pages 2 and 3:
***
Employment not pensionable: general
7.-...(3) A person who makes an election under regulation 9 (election for employment not to be pensionable) is not in pensionable employment while the election has effect.
***
This part clearly states that you can elect for your employment NOT TO BE PENSIONABLE, or in other words you OPT OUT of the pension scheme!
Thanks David, that's a great video. I have a question as this video matches my circumstances but does one have to take a 'pensionable working day' off to trigger the pension and retain the teaching post, albeit for only a few months?
The way to trigger the entitlement day, and therefore the 'start' of the pension is to leave 'pensionable service'.
You can do that in two ways once you are 60+.
1) As described here - opt out of pensionable service, i.e. leave the TPS but stay in your teaching post.
2) Become unemployed for a day (or longer)
The first requires no agreement with the school, other than their processing of your opt-out request, but the minimum period you can be 'opted-out' for is a month.
The second does need you to have an employer who is willing to give you a day's break in service and that brings other issues that depend on continuity of service into play, such as sick pay and redundancy rights.
Bear in mind that although the pension will 'start' on your entitlement day it won't actually get PAID to you until you apply for it. I have known teachers unknowingly trigger their entitlement day and then not claim the pension for years - they got a shock when presented with their income tax bill that year. (One I know waited 5 years and had a pension of, in today's value, £20,000. The 5-year total of course was £100,000 and so they ended up losing an awful lot because much of it was then taxed at 40%!).
One last thing to consider is that if getting your pension when added to your other income does take you into a higher tax bracket then you can still put more into a private pension scheme. Unlike taking money out of such private schemes, taking the TP does not trigger the lower limit for contributions to a private pension thereafter. Currently the limit is the lower of 100% of your salary, or £40,000. The lower, triggered amount, would have been £4000.
Hi David, what about the effect of actuarial uplift on late retirement.
For the NPA60 final salary scheme, this is the point...there is NO UPLIFT.
Unlike taking the pension "early" where there is a reduction based on the fact that you will receive extra payments there is no corresponding increase for taking it late.
Hi David, I am a teacher in Scotland and just wanted to Check if this option to leave the pension scheme for a month after my 60th birthday in April would apply to the Scottish scheme.
My NPA under the old pre. 2007 final salary scheme. as 60,
If possible, I would come out of the scheme for the month, then become eligible for the pension and aim to work three days per week for a couple of years. So my hope is I would get my three days per week pay plus my Final salary element of my pension,.As I say, I’m just concerned that this may not apply to the Scottish scheme.
. Would appreciate if you’re able to offer any thoughts on that David.
Thank you
The SPPA rules do have some subtle differences and I'm afraid this is one I cannot be certain is the same. You will need to contact the SPPA and ask them what triggers your "entitlement day" for the NPA60 pension - will it be triggered by being "out" of the pension scheme but still employed or is a full break in employment required.
Hi David, thanks for posting these helpful videos. What I am slightly unclear about in this and one of your other videos is that surely a very big difference between early and late retirement is the salary itself (ie if one retires early this salary is not earned)? Or perhaps you are assuming that one continues to work and also claim pension?
Yes, you are absolutely correct if you carry on working then the salary is likely to be many times more than the pension and of course working a year longer both increases the pension (so long as your final salary isn't falling) and results in a lower reduction figure. However, my focus is on looking to see if you can get to a pension figure that can sustain you once you finish working and to realise that once you have done that then carrying on for another year because you don't want to "lose" out on the pension reduction isn't where your focus should be.
The pension gives you two rewards. One is the cash but the other is the opportunity to stop or reduce how much you work...it gives you time as well. You can choose to 'spend' that time earning cash from other sources or not and when you consider that if you stop teaching altogether that you get so much time back, and I'm talking about the "real" amount of time that the job takes and not the friendly mickey-taking friend's quote about working 9 till 3, then you can work out whether you need to work another year to put another £60 a month on the pension and increase your savings (because if you aren't increasing your savings whilst on a full-time wage then I'm afraid you probably aren't ready to start your retirement and living off just the pension yet ;) )
In fact, if you have not enough to retire on and are approaching 60 then taking the final salary NPA60 pension 'early' and returning to teaching will give you a significant advantage as in that case you get the unabated pension plus your salary.
@@dfountain Thank you for the detailed reply. That is very interesting and informative. I am 60 this year, have been in the TPS since 1991, and am considering phased retirement (I see you had another interesting video on this). As I understand this you can take up to 75% of benefits for at least a 20% reduction in salary and must remain with this for one year. Can I ask - given the need to reduce salary by 20%, is there any danger of this reducing the pension?
Kind of but fixable.
Going part-time doesn't, of itself, reduce the final salary pension because the calculation of the FS pension uses the full-time equivalent salary. However, if you drop the 20% by stepping down from a TLR or other responsibility then it might.
In fact even carrying on working can lead to a reduction if your final salary falls...and this is possible even if your wages go UP!
Take a look at the video called "The Pay Plateau" where I explain this.
The one thing I would suggest you take a close look at is whether you can get your school to agree to you taking a day's break from their employment for a single day before you reach 60. If they will then you can claim your pension 'early' and then have no restriction on what you earn upon your return.
One of the issues with the NPA60 pension that you are in is that there is no enhancement for taking it 'late'. It simply doesn't start until you leave pensionable employment.
As you are approaching 60 there is one other option open to you.
You can start your NPA60 pension without leaving employment once you are over 60. The problem with this is that it can lead to your pension being abated (I have a video on that too called "The Pickpocket Clause"). If you are considering going part-time though then you might find a happy medium where it doesn't get abated.
@@dfountain Thank you David. I will watch those two videos and have a think...
Can’t you claim the NPA 60 pension in April, continue to pay into NPA 67 pension as you don’t have to take it at the same time if you’re over 60? Then take the NPA 67 pension in September or anytime up until you’re 67.
The problem is that to qualify for the career average pension after you have taken the final salary pension is that you need at least 1 year's worth of contributions.
You can qualify for a short-service annuity if you have less than 12 months in the scheme, and I have a spreadsheet on my blog that details how much that would be, but that takes around 20 years to pay itself back.
@@dfountain I’d have two years in the NPA by then. However, I’m not sure if I could get an abatement from April 2024 until September. Probably looking best to go April 2024 with 38 years in the NPA 60 when I will be 60. To be honest that would give me not much short of my take home pay now as I won’t have NI to pay and I’m currently buying past years which will conclude Jan 2024. Can’t see the point in working for almost the same money. Many thanks for all your brilliant videos. Our head sanctioned a £1 pay rise this year as your suggestion.
I am over 60, in the old final salary scheme, and was not planning to retire just yet, however, my school is likely to come out of the TPS by the end of the year. Therefore drawing my pension asap seems the best option. Until viewing your video I didn’t know this was possible, but does the abatement rule still apply?
This is not something I am 100% confident about so I would appreciate your taking this up with TPS directly and letting me know what they say. My gut feeling is that you won't be subject to abatement from the time your school leaves the TPS. The timing of that could be significant because the abatement rule works on the total paid in a financial year. So, if I am right that your salary upon your school leaving the TPS is no longer counted towards the total limit then if your school left this August you'd have less than half a year's salary and therefore have more available to take in your pension. If they aimed to leave on 31 December then you'd be getting three-quarters of your salary - which still leaves a large amount that your pension could fill.
The regulation that causes me some doubt is this one and in particular the phrase "comparable British service":
64.-(1) This regulation applies while a person (P) falling within paragraph (2) is employed-
(a) in pensionable employment, comparable British service or employment which would have been pensionable
The definition of this phrase is this: "service pensionable under a comparable British scheme." In my, completely unqualified opinion, any scheme that your school enters into on leaving the TPS is unlikely to be a defined benefit scheme and should not therefore qualify as being "comparable".
The question I'd like you to ask TPS then is this:
"My school intends to leave the TPS and start a defined contribution scheme. Would this under regulation 64(1)(a) be considered comparable British service?"
Now, there is a second point and that relates to your service from 1 April 2022 through to when your school leaves the TPS. If you opted out of the TPS now (effective May 2022) and start taking your Final Salary pension on 1 May 2022 what happens to your career average pension? Normally on return to service after taking the pension you would have to be in service for 365 more days for it to qualify you for additional pension rather than an annuity. If your school left on 31 December then you won't have added 365 days.
How much of a loss staying out of the scheme would be I don't know especially if you are not subject to abatement and would be getting 8 months of your full final salary pension in the meantime!
I’m 60 in April 2024. Could I take my NPA 60 pension in April 2024 until I retire in September 2024?
Absolutely you can.
There are only two reasons (IMO) not to.
1 - You believe you final salary will increase between April and August. (The best of Method A or B)
2 - You believe the career average pension you will add in those same 5 months is worth more than the total paid out in those 5 months from the final salary.
In essence the ending of the final salary scheme in March 2022 means that the only real benefit of staying in that scheme - being able add more service - has gone.
Taking it earlier, say a year or two before you retire is a greater risk as you have more time to get an above inflation pay rise and you may fall foul of the abatement rules.
Hi there - would the opting out still apply in 2024?
Yes. To get the final salary pension 'started' you have to be out of "pensionable employment" and over 60, this can be done by simply opting out of the pension scheme. If you were in the TPS before 2007 then you will have some of your service in the final salary scheme and it doesn't matter how old you are. This will still apply in 2024, 2030, 2040...(very few people will have started before 2007 and still be in teaching later than this though)
@@dfountain Thanks David. That is really helpful as I consider options over the next couple of years. Really appreciated, John
Hi please can I ask, what happens if you are under 60? I am planning to retire in September but am only 57. Should I stop paying into my pension in April?
Without checking your figures I cannot give an answer with absolute certainty as it depends on what is happening with your final salary. If your best final salary is coming from the months and years that are exactly 10 years ago - which with over a decade of below inflation pay rises and freezes is quite possible - then your "final salary" could be dropping. If that is the case then only working through the figures will tell you the consequences.
However, this video is all about those who are already OVER 60 because their payout starts the moment they opt out. This is not the case for those under 60.
I would recommend that those under 60 either don't opt out, or only opt out for 1 month, depending on their salary movement. You don't need to have 1 year in the Career Average scheme for it to pay out if you are going into it following your final salary scheme (even with a break of up to 5 years).