2021 Spring Term 2

The know zone

  • Effective transition
    The impact of the pandemic on lost learning for primary school pupils moving up to secondary school is a growing concern. Never has the focus on high-quality collaboration and early transition planning been so important, says ASCL Specialist Tiffnie Harris. More
  • Getting our priorities right
    ASCL Specialist Margaret Mulholland believes that Covid-19 has highlighted the stark reality of disadvantage and segregation in our education system. Now, she says, it's time to get our priorities right. More
  • Brave new world?
    As the government launches its consultation on changing the way our students apply to university, ASCL Specialist Kevin Gilmartin examines the key proposals. More
  • Defining your benefits
    ASCL Specialist Jacques Szemalikowski highlights the benefits of belonging in the Teachers' Pension Scheme. More
  • Remote teaching
    We've all had to change the way we work during this crisis, especially during lockdown. Here, ASCL members share their experience of remote teaching and working throughout the pandemic... More
  • Candid camera
    Principal Hannah Knowles says being a member of ASCL Council is a privilege and it has widened her vision of education. Here she shares her passion for Council, teaching and leading, and her dislike of... 101 Dalmatians. More
  • A time for peas
    Home schooling plus online meetings and lessons while minding three youngsters... not to mention the head injuries, disastrous baking and 'comfort breaks'. Alex Wallace opens up his lockdown diary from early last year. More
  • Remote audit
    The impact of Covid-19 has brought many challenges for academies over the last ten months, but one rarely mentioned is that faced by finance and management teams as they undertake the annual external audit remotely, says Andy Jones from Cooper Parry. More
Bookmark and Share

ASCL Specialist Jacques Szemalikowski highlights the benefits of belonging in the Teachers’ Pension Scheme.

Defining your benefits

The new President of the United States, Joe Biden, once said, “Don’t tell me what you value: show me your budget and I’ll tell you what you value.”

That maxim can easily be applied to colleagues in the Teachers’ Pension Scheme (TPS). Belonging to the TPS means you are contributing in a highly cost-effective way towards an excellent pension scheme – something every ASCL member I know values greatly. Personally, having retired from 17 years of headship, and 38 years of service last summer, I can vouch for that.

Any pension scheme is basically a way of saving for your long-term future, so you are financially secure when you retire. Pensions are cost-effective because, subject to annual allowance, contributions are taken from your gross salary before tax. So, for example, a £1,000 contribution to a pension is a whole £1,000 taken before tax, all of which goes towards your pension. Taking that money home instead, if you pay 40% tax, would only leave you £600 to put away.

Defined Contribution versus Defined Benefit

The TPS is one of the two main groups of occupational pension schemes that makes up a key component of an employee’s remuneration package. In both types, employees pay a percentage of gross salary towards their pension each month, which is further topped up by employer contributions.

The first and most prevalent arrangement is called a Defined Contribution (DC) scheme. In a DC scheme, actual contributions as paid are invested in a pension fund. The pension you eventually get then depends on the fund’s stock market performance at the time you take your pension. Additional Voluntary Contributions would be an example of a DC scheme. Consequently, DC schemes are subject to market forces at the time of retirement. While a degree of protection is there (the Pension Protection Fund), we have seen stories from retail, commerce and media enterprises where mismanagement has led to considerable heartache.

Unlike these DC schemes, the TPS (alongside others such as the police, the Armed Forces, the NHS and civil servants), is a Defined Benefit (DB) scheme. In these DB schemes, the pension is guaranteed by the government and does not depend on stock market performance of your fund. Instead, it will pay you a guaranteed income for life (called your annuity) that, put simply, depends on your salary, your years of service and your age.

Tax-free lump sum

Many ASCL members will further receive an automatic tax-free lump sum. In any case, the TPS also has an option of converting some of your annuity into a tax-free lump sum to, say, pay off the mortgage, take a Caribbean cruise (when permitted) or buy that Harley-Davidson. You can also convert some of your annual pension into a tax-free lump sum up to certain limits.

Benefit statements

Moreover, your accrued pension is re-valued each year, unlike any scheme purely dependent on how investments perform. You can check your benefit statement at any time by logging on to the TPS website at www.teacherspensions.co.uk and scrutinise the build-up of your pension benefits, as well as estimating your benefits upon retirement.

Life insurance and ill-health benefits

Often overlooked, beyond your own financial security, the TPS also includes excellent life insurance for your loved ones should the worst happen. This equates to a lump sum of three times your salary, plus some ongoing benefits. Moreover, it provides protection should you fall ill and are no longer able to carry on in your role.

Flexibility

The TPS has a degree of flexibility, too. You can pay more into the pension scheme so that you can get more out, which is especially useful if you want to be able to afford to retire early from the age of 55. Having said that, as there is no actual pot of money, or pension fund, DB schemes like the TPS are often misleadingly called ‘unfunded’ schemes. Consequently, there may be less flexibility than in some DC schemes, such as being able to move your money around.

Income for life

The TPS easily outstrips the vast majority of DC schemes, with your accrued benefits being far better, at price, than any other I have seen. Sure, you may not have all the flexibilities, but you do have the reassurance of a generous guaranteed income for life, alongside robust life insurance and ill-health benefits.

Definitely, Mr President, that is something of great value within a great budget.

Jacques Szemalikowski
ASCL Conditions of Employment Specialist: Pensions
@ASCL_UK

LEADING READING