With your retirement just a hop, skip and a jump away, you are probably busy making plans for your time – but before you get too carried away with the holiday brochures and your ‘to do’ list, there are a few things you need to do to make sure your transition into retirement is a smooth one!
Make sure your retirement plans are in order – ask yourself:
Q Will my teachers’ pension be paid to me automatically?
If you don’t ask for it – you won’t get it! You must apply for your retirement benefits, they will not automatically be sent to you. You should apply to Teachers Pensions about four months before the date of your retirement. You can obtain an application form from your employer if you are in service, otherwise it can be downloaded from the forms and leaflets section of the Teachers Pensions website – www.teacherspensions.co.uk.
Q Should I increase my pension lump sum by sacrificing some of my pension income?
This is the big question facing retiring teachers. When applying for your pension you will be asked to select if you wish to take an increased lump sum by giving up some of your pension income. It’s very important that you give full consideration to this option – once you are receiving your pension there’s no changing the options you have taken. This is a lifestyle choice and will depend on your own personal circumstances. As well as your requirement for immediate capital and on-going income, your tax status in retirement could also influence which is the best option for you.
If you are unsure of what benefits to take, or just want to double check that what you have in mind is the right thing for you, visit our website www.teachersassurance.co.uk/retirement.shtml where you’ll find a wealth of information about how to manage your Teachers Pension. Alternatively you could call our Customer Support Team free on 0800 056 0563 and they’ll guide you through the process.
Q When will I receive my Teachers’ Pension benefits?
Your pension lump sum will be paid to you on the first working day after your retirement date. For example, as the majority of teachers choose to retire in September (thus receiving 6 weeks paid holiday first!), they will receive their lump sum on the first school day in September.
You will receive your regular monthly pension payment depending on your birthday. For example, if you were born on the 18th of the month, your pension will be paid on the 17th of each month.
Q What should I do about other pension arrangements I have paid into?
I am making/have made contributions into other pensions
Ø Personal Pensions
Ø Additional Voluntary Contributions (AVCs)
Ø Free Standing Additional Voluntary Contributions (FSAVCs)
Ø Stakeholder Pension
You do not have to take the benefits from these plans at the same time as you retire, and can defer taking them until a later date.
When you want to take your benefits, you need to notify your plan provider of your intention to retire, and request information of your current fund value and your retirement options.
Unlike the Teachers Pension Scheme these plans do not offer guaranteed benefits – but instead accumulate a fund that will provide you with retirement benefits. The fund size will depend upon the amount of contributions paid in and any investment growth the fund has received, so the larger the fund – the greater the income.
You can take up to 25% of your fund as a tax-free lump sum, the remaining fund must be used to provide a pension income which will be taxed as earned income. Upon request, your pension provider will provide you with details of your fund value and the retirement income they can offer you. As well as the size of your fund, the rate you will receive will depend upon a number of other factors including: -
Your age
You can choose to take your benefits from age 55 – 75. The ‘older’ you are when you take your benefits, the better they are likely to be.
Guarantees you want included
Do you want your income to increase each year?
How you want the income to be paid Monthly, quarterly, in arrears, in advance?
It’s important to know that you are not obliged to buy your pension income from the company you have been paying your premiums to - you have a legal right to ‘shop around’ for a better deal. This is called an ‘Open Market Option’ and you should investigate other providers to see if you could get a better deal from your fund.
If you are satisfied with the retirement package offered to you by your current provider, you need to complete and return their forms – indicating your requirements as listed above. If you identify a better option from another provider – you need to make the request to them; they will forward relevant documentation to you and will arrange the transfer of your fund to them from your existing provider.
Q I have previous membership of an occupational pension scheme
If before becoming a teacher, you were a member of another occupational pension scheme, now is the time to get in touch with the scheme administrators – notify them of your retirement and request information of your retirement options from their scheme.
Q Do I need to replace any benefits that will stop when I retire?
Whilst in service and a member of the Teachers Pension Scheme, you have a Death in Service benefit that pays a lump sum of 3x your salary if you die. When you retire this benefit will stop. Depending upon your family’s financial needs, you may need to consider replacing this benefit with a life assurance policy. For full details of the benefits you currently receive and whether you need to replace them, visit the Insurance section of our website – www.teachersassurance.co.uk,where you’ll find a wealth of information. Alternatively you could call our Customer Support Team free on 0800 056 0563 and they’ll talk you through the benefits you have and how to replace them.
Q When can I start getting my State pension?
You can claim your State Pension once you reach state pension age – this is currently age 65 for men born before 6th December 1953, and between ages 60 and 65 for women born after 5th April 1950 and before 6 December 1953.
These dates and ages are subject to change, to get the most up to date information for you visit www.direct.gov.uk.
The Pension Service should automatically send you a State Pension Information booklet and invite you to claim 4 months before you reach State Pension age. If you haven’t received this 2 months before your state pension age, you can download theState Pension Claim Form from www.direct.gov.uk.
You can also put off claiming State Pension until later and get a higher weekly amount or a one-off taxable lump sum.
Get answers to your questions, use the resources available to you and look forward to your retirement.
About us
Teachers Assurance has been providing financial education, information and support of education professionals and their families since 1877.
To find out more about the services offered by Teachers Assurance, visit www.teachersassurance.co.uk or call our Customer Support Team free on 0800 056 0563
This article contains information that is based on our understanding, as at February 2012, of current taxation, legislation, Teachers Pensions and HMRC regulations, 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 are in any doubt whether a product is suitable for you, you should contact an Independent Financial Adviser. You can find details of your local Independent Financial Adviser by visiting www.unbiased.co.uk. Please note, you may be charged for advice. 792712
