Now’s the time to think about if you will be able to afford the future you want.

 

Even if your retirement feels like a long way off, the sooner you give some thought to what you can expect, the easier and more affordable it will be for you to ensure you will have a retirement lifestyle you can really enjoy.  Realising that your benefits are not going to be enough the year before you retire is too late!

 

Do you need to top up your pension? 

 

Before you start thinking about just how wonderful your retirement is going to be when you don’t have to go to school everyday and your time is your own, you should consider if your future income is going to be sufficient.

 

As a member of the Teachers Pension Scheme you can look forward to receiving guaranteed retirement benefits.  These will be based on your length of service and your final salary, so if your service levels are low – you’ve taken a career break, worked part-time, or entered the profession later in life – you may need to consider topping up your benefits.

 

Perhaps you can’t wait for your Normal Retirement Age and want to retire and take your benefits early, in which case they will be significantly lower than if you work until your normal retirement age. There are lots of questions to be answered and we’ve given an outline of some of the most important points below. However, if you are in any doubt about what would be most appropriate for you then you can click here to request a personal financial review.

 

To help you decide if you need to consider topping up your pension, ask yourself:

 

Q          What will my retirement income be?

 

How much are you likely to get from the Teachers Pension Scheme and any other pension schemes of which you are (or have been) a member?

Go to http://www.teacherspensions.co.uk/ to get an estimate of your Teachers Pension benefits.

 

What State Pension can you expect and when?

Go to http://www.direct.gov.uk/ to apply online for a State Pension Forecast.

 

Q          Will my retirement benefits be enough?

 

Once you have an idea of the retirement benefits you can expect to receive (and when) you need to compare this to your likely monthly outgoings and capital expenditure. Whilst you won’t have a crystal ball, you should be able to get a rough idea. Remember that your mortgage may be finished, and (hopefully) your children will be less financially dependant on you but bear in mind that, as you won’t be working anymore, you could see other expenditure such as leisure, hobbies and even utility bills increase.

 

Get an idea of what your monthly income and expenditure might be – go to My budget planner.

 

Think about whether you’re going to need any capital - you might want to make some expensive purchases such as a new car, holiday, home improvements, holiday home or caravan and you need to decide how to fund this without affecting your income in retirement.

 

Will you have enough?

 

If the figures don’t tally and your current provision doesn’t look like meeting your needs, you should think about topping up your future benefits.

 

Q          How can I top up my future benefits?

 

If you need extra income in retirement you could consider -

 

Buying additional pension benefits via the Teachers Pension Scheme

 This arrangement is made directly with Teachers Pensions –

• You can increase your annual pension by up to an additional £5,200 (part of which you can choose to take as a tax-free cash sum at retirement).
• You can purchase future benefits for yourself or you can add benefits for dependants
• You can pay for the additional pension by lump sum or regular amounts deducted from your salary.
• You will receive tax relief on your contributions at your highest level.
• The cost will depend on your age and the amount of additional pension you wish to purchase.
• The benefits you buy are guaranteed and index-linked.

 Go to www.teacherspensions.co.uk for more information and to calculate what it will cost to fund your extra benefits. 

 Investing in an Additional Voluntary Contribution (AVC) scheme

• You can contribute via regular or lump sum contributions.
• You will receive tax relief on your contributions at your highest level.
• Your money is invested in a fund of your choice.
• When you take your benefits (either at retirement or a later date) you can take up to 25% of the fund as a tax free lump sum, the remaining fund must be used to buy you a pension income which will be taxed as earned income.
• The eventual level of pension (and tax-free cash if taken) is not guaranteed, and will depend upon a number of factors including the fund size – the amount of contributions paid into the fund and any investment growth the fund has received – your age, and your health.

The teaching professions’ AVC scheme is provided by Prudential.  Go to www.pru.co.uk for more information.

Investing in a Free Standing Additional Voluntary Contribution or Stakeholder Pension scheme

• You will receive tax relief on your contributions at your highest level.
• Your money is invested in a fund of your choice.
• You can take up to 25% of the fund as a tax-free lump sum - the remaining fund must be used to buy you a pension income, which will be taxed as earned income.
• The future benefits you will receive are not guaranteed and will depend upon the fund size, your age and health at the time.

 

Various insurance companies offer these types of scheme.

 

If you need extra capital in retirement you could consider -

Saving in a Bank or Building Society account

 

If you do not want to risk your money, you can save in a bank or building society account. You may wish to consider Cash ISAs, which offer a means to save without paying tax on your interest.  Interest rates vary and it is worth looking in to what is available.

 

Investing lump sum or a regular monthly amount for growth

We offer a range of options from Stocks & Shares ISAs (where the proceeds are free from capital gains and income tax) to Guaranteed Savings Plans, which provide capital protection as long as your premiums are paid for the duration of the investment term.

 

If you are in any doubt about what would be most appropriate for you then you can click here to request a personal financial review.

  

Q          How do I decide what options are best for me?

 

There is a wide and diverse range of choices available to you to top up your pension. The most appropriate option for you will depend on a number of factors, including your age, your future income and capital requirements, how much you can afford to put away, and your current and future tax status. Whilst there are a lot of things to take into account, making the right choice doesn’t have to feel like hard work. A discussion with a financial consultant will enable you to identify what would be most appropriate for you.

 

Q          What can I expect from a discussion with a Teachers Assurance consultant?

 

Our team of consultants operate throughout England and Wales, and specialise in helping teachers make financial plans for their futures.  They are all experts in the Teachers Pension Scheme and its associated benefits which means they can: 

• Explain how the Teachers Pension Scheme works
• Calculate your likely pension benefits including State Pension
• Help you determine whether you need more income or capital in retirement
• Advise you on the most suitable option(s) to top up your benefits

If you are in any doubt about what would be most appropriate for you then you can request a personal financial review.  If you would like to take advantage of this service, Contact Us and we’ll arrange for your local consultant to come and see you.

 

Get answers to your questions, use the resources available to you and make informed decisions for your retirement.

  

About us

Teachers Assurance has been looking after the financial interests of education professionals and their families since 1877.

 

Our nationwide team of Financial Consultants have expert knowledge of the Teachers Pension Scheme.  This means they are able to offer a retirement planning service that will take into account existing benefits, identify any shortfalls, and offer financial solutions to address them.

 

As well as retirement, our consultants provide advice on investments, savings and protection products and services from Teachers Assurance and selected third party providers.

 

To arrange to receive financial advice or find out more about the services offered by Teachers Assurance, visit www.teachersassurance.co.uk or call Freephone 0800 056 0563

 

This article contains information that is based on our understanding, as at 18 April 2010, of current taxation, legislation, Teachers Pensions and HMRC, all of which may change without notice. The impact of taxation (and any tax reliefs) depends on individual circumstances.

 

None of the information contained in this article should be considered as advice to save, invest or purchase. If you have any doubt as to whether or not a product is suitable for you, please ask us for advice. We are only able to advise on our own products and those of selected third party providers.

 

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