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Transfer from Teachers Pension to Civil Service Pension?

portmoon
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Transfer from Teachers Pension to Civil Service Pension?

#175852

Postby portmoon » October 23rd, 2018, 8:33 pm

Hello

My partner has been a teacher since 2002 but is moving into a civil service job in November. She’s taking a pay cut from about £60k to £35k.

She’s trying to decide if she should transfer her Teacher’s Pension into the Civil Service Scheme.

I’ve been trying to get my head around this but it seems complicated.

The civil service alpha scheme is a career average scheme. You build up a pension at a rate of 2.32% of your pensionable pay each year. So that works out at about 1/43rd.

The teacher’s pension scheme she is in is also a career average scheme, and they calculate her pension at 1/57th (1.75%) of her earnings.

So the career average bit of the Teacher’s Pension scheme is not as good.

But it’s complicated by the fact that she’s only been in the career average scheme since 01/04/2015, and before that she was in a final salary scheme. As she’s leaving teaching, I assume her final salary pension will be calculated on what her salary is now (~£60k).

The final salary scheme would have paid 1/80th of her salary at retirement. Both bits of her Teachers Pension added together are currently worth about £14k per year (they don't give you a 'closing value' on the statement) .

I guess it partly will depend on how much her salary increases in the civil service and if she stays in the civil service until she retires?

Any thoughts at all would be much appreciated!

Many thanks!

Alaric
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Re: Transfer from Teachers Pension to Civil Service Pension?

#175856

Postby Alaric » October 23rd, 2018, 9:08 pm

portmoon wrote:She’s trying to decide if she should transfer her Teacher’s Pension into the Civil Service Scheme.


You need to find out what's on offer. At one time all the public sector schemes offered broadly the same benefits and had a "transfer club" so that if you moved within the public sector, you were treated as if you always had been employed by your current employer.

But that was when they all offered final salary based schemes. Now that they are mostly average salary, it might be the case that the same benefits are on offer whether you leave the "old" pension behind or transfer it.

Chrysalis
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Re: Transfer from Teachers Pension to Civil Service Pension?

#175919

Postby Chrysalis » October 24th, 2018, 9:20 am

Yes, you need to understand what benefits your wife will get within the civil service from the transfer of her accrued teachers pension,compared with leaving those benefits in the teachers pension. Also check the age at which the pensions are payable. For example is the final salary part of the teachers pension payable at an earlier age than the career average, which will typically be pegged to state retirement age?
Another question will be to find out if the final salary benefits can be kept within the teachers pension and perhaps transfer only the CARE benefits?
My understanding (which should be checked out) is that the civil service CARE scheme is likely to be more generous than the TPS CARE scheme, but neither are likely to be as good as the final salary scheme. And, that doesn’t mean that transferring in the CARE accrued benefits will make them worth any more than they are within the teachers scheme - you need to look carefully at the factors by which they are each uprated. The deferred teachers pension will be uprated in deferral, the two parts possibly by different amounts. You then need to work out what benefits you’d get in the civil service scheme if you were to transfer, and how much they would be uprated by each year.
Do either of the teachers or civil service unions have any pensions advisors you could talk to? It’s a fairly complex scenario.

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Re: Transfer from Teachers Pension to Civil Service Pension?

#176261

Postby earlsgate » October 25th, 2018, 6:08 pm

I would be careful of taking advise from the unions, as in my experience they are rather lacking in their knowledge of these matters and are inclined to give poor advice rather than admit they were out of their depth

On the other hand I would highly recommend speaking to the people in Darlington, where the teachers pensions are administered. I always found them helpful and able to provide exact answers, especially as they have direct access to the details of the caller and many years answering similar questions.

personally I would doubt one could do better than leave the teachers pension where it is now taking advantage of the deferred payments. I guess the number years/age of the person concerned will have some bearing on the situation. All this can instantly be computed by TPS with a realistic projection available in writing for ones consideration.

obviously one imagines the administrators of the civil service pension will be able to provide some similar projections for comparison

Mike88
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Re: Transfer from Teachers Pension to Civil Service Pension?

#176264

Postby Mike88 » October 25th, 2018, 6:17 pm

My advice would be to delay any pension transfer until your wife is sure she wants to remain in the civil service. Having worked in 3 government Departments I can say in all honesty that, contrary to popular belief, some Departments are akin to working in a sweat shop with virtually impossible deadlines especially if you are unfortunate enough to be dealing with Ministers. My private sector experience was far more pleasurable and involved far less stress which will come as a surprise to many. If your wife escaped teaching for an easier life - and I know from my teacher wife that teaching is not easy - your wife might find the civil service to be as bad or probably worse dependent of course on her grade and the Department she is joining.

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Re: Transfer from Teachers Pension to Civil Service Pension?

#178429

Postby Lazyferret » November 6th, 2018, 9:54 am

Make sure your partner checks all the maths and also seeks advice and estimates of the final pension from the Civil Service Pension scheme BEFORE starting the transfer process and compares them thoroughly with the statements/estimates she has from her existing pension scheme. I did a similar thing about 6 years ago, swapped one public sector job for a different much lower paid job in a another area of the public sector. Because these are still final salary pensions, I found that if I decided to move my pension I would have lost about a third of the final pension value. I decided to keep my initial pension intact and start and new one with the new job - not ideal, but better than being paid a third less each year in retirement.

To be fair to the pesnion schemes, even if she starts the transfer process, they should flag up to your partner if she stands to lose out by the move so that she can stop it before the final transfer is made.

'ferret

modellingman
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Re: Transfer from Teachers Pension to Civil Service Pension?

#179356

Postby modellingman » November 10th, 2018, 12:28 pm

A further element to factor in to your calculations is the incorporation of lump sum payments at retirement.

The old teacher's final salary scheme also included a lump sum payment (tax free if memory serves in my wife's case) of 3/80 of pensionable (ie final) salary for each reckonable year of service.

I have not researched the current teacher's scheme but I would imagine that part of the apparent difference in accrual rates between it and the civil service scheme may be due to the inclusion of a lump sum benefit in the former which is absent from the latter (or may require commutation of income benefits in retirement within the latter).

The point about retirement ages by an earlier poster is also well made. The old teachers scheme had a normal pensionable age of 60. As schemes have been reformed from finally salary to career average, the opportunity has been taken to push up retirement ages either to 65 or the state pension age. Actuarial reductions for retiring early are typically 4.5% to 5% per year, so if your wife doesn't plan to hang on beyond 60, reckon on pension being yup to 25% lower than any quotes obtained from the career average schemes.

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Re: Transfer from Teachers Pension to Civil Service Pension?

#179727

Postby daveh » November 12th, 2018, 2:41 pm

modellingman wrote:
The point about retirement ages by an earlier poster is also well made. The old teachers scheme had a normal pensionable age of 60. As schemes have been reformed from finally salary to career average, the opportunity has been taken to push up retirement ages either to 65 or the state pension age. Actuarial reductions for retiring early are typically 4.5% to 5% per year, so if your wife doesn't plan to hang on beyond 60, reckon on pension being yup to 25% lower than any quotes obtained from the career average schemes.


But, if the teachers scheme is like the USS scheme, when the change was made benefit built up before the change should be takeable at the original retirement age without actuarial reduction. For the USS the retirement age was 65, but you could retire early from 60 onwards without actuarial reduction. The scheme was changed in (I think 2013) and again this year, but I was told at the time of the first change that benefits accrued up to the change could still be taken at 60 without reduction, benefits beyond the change would be reduced for each year before the scheme retirement age. That seemed to be the case the last time I played with the USS benefits calculator as there was only a small decrease in pension if I set retirement at 60, but a much bigger drop if I set retirement at 55.

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Re: Transfer from Teachers Pension to Civil Service Pension?

#179826

Postby modellingman » November 12th, 2018, 7:40 pm

daveh wrote:
modellingman wrote:
The point about retirement ages by an earlier poster is also well made. The old teachers scheme had a normal pensionable age of 60. As schemes have been reformed from finally salary to career average, the opportunity has been taken to push up retirement ages either to 65 or the state pension age. Actuarial reductions for retiring early are typically 4.5% to 5% per year, so if your wife doesn't plan to hang on beyond 60, reckon on pension being yup to 25% lower than any quotes obtained from the career average schemes.


But, if the teachers scheme is like the USS scheme, when the change was made benefit built up before the change should be takeable at the original retirement age without actuarial reduction. For the USS the retirement age was 65, but you could retire early from 60 onwards without actuarial reduction. The scheme was changed in (I think 2013) and again this year, but I was told at the time of the first change that benefits accrued up to the change could still be taken at 60 without reduction, benefits beyond the change would be reduced for each year before the scheme retirement age. That seemed to be the case the last time I played with the USS benefits calculator as there was only a small decrease in pension if I set retirement at 60, but a much bigger drop if I set retirement at 55.


Good point. I suspect, but have not checked, that the teacher's scheme will be similar: ie benefits accrued under the old scheme will become payable at the old pension age, whilst benefits under the new scheme will be delayed until the later new pension age or subject to actuarial reduction if taken earlier.

If the OP's partner has the option to transfer her years of service accrued under the old and new schemes she may well find that they are not transferred on a 1 for 1 basis and that different adjustments may be applied to old and new scheme years to account for differences in salary levels, retirement ages, etc between these schemes and the proposed civil service scheme.

Many years ago I voluntarily transferred my pension from a privatised utility to a private sector company I had joined under an outsourcing agreement. Although both schemes were final salary schemes based on sixtieths, the new employer's scheme had a latter retirement age (65 vs 60) and had less generous inflation guarantees (3% pa vs uncapped). In consequence, years of service were transferred between the schemes using an uplift factor of around 1.5.

In the OP's position I would be getting a quote from the civil service scheme for transferring service from both the old and new teacher schemes. Then I would construct a fairly simple model involving expectations of future earnings, retirement age, retirement lump sums, and whatever else is important to my situation to help me make my decisions.


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