November 2013

The know zone

  • Pensions unpicked
    Thought about retirement yet? However far off it may be, start looking now at your options, says David Binnie. There may be unforeseen complications but also opportunities. More
  • Squeezed middle
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  • Raising the stakes
    Ofsted judgements look likely to be tougher in key areas under the revised guidance introduced in September, says Jan Webber. And the bar is being set higher for achieving ‘good’. More
  • Leading education
    ASCL exists to reflect and promote the views of its members, which is why ASCL Council is so important. ASCL Council is made up of 148 elected representatives and is the association’s policy-making body, meeting four times a year. Council members represent ASCL at meetings with government officials and other organisations. It is from Council that national officers, including the president, are elected. In each edition of Leader this year, we will spotlight the work of a particular committee of Council. This month, it is the turn of the Education Committee. More
  • Council focus
    What does it mean to be a Council rep? More
  • ASCL PD events
    New to the leadership team, Leadership for Outstanding Performance, and Homerun for Headship More
  • First term almost over
    ASCL Professional Development (PD) offers high-quality, relevant, up-to-date and competitively priced courses. Our training is delivered by a team of skilled trainers and consultants, almost all of whom have been headteachers or senior school leaders. More
  • How do you say?
    Focus on... 1,000-words challenge More
  • Adding value
    Time to protect your pension pot? More
  • Food for thought
    The government plans to spend £600 million on free school meals (FSM) for every child in a state-funded infant school and disadvantaged students in further education. Is this a good idea? Is this money well spent or should it be spent elsewhere? Here ASCL members share their views. More
  • Leaders' surgery
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  • Choice language?
    Would you like IT with your G&T? Or, like Eric Hester, are you bemused by the proliferation of acronyms? More
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Thought about retirement yet? However far off it may be, start looking now at your options, says David Binnie. There may be unforeseen complications but also opportunities.

Pensions unpicked

Even if your planned retirement date is some way off it is worth being prepared. There may be unexpected circumstances that bring the date forward or possibilities within your pension scheme that you hadn’t thought about. There are a number of aspects to consider.

Type of retirement

To retire at the pensionable age – normally 60 or 65 – as defined in a scheme is termed an ‘age’ retirement. There is no reduction or adjustment to the pension but there may be restrictions on further work (see below).

An ‘actuarially adjusted’ pension may be taken after 55 but with a reduction for each year before the normal retirement age.

‘Premature retirement’ is a formal process in which the employer agrees to contribute to the pension. This is increasingly rare in the age of austerity but can be negotiated as part of a voluntary redundancy or severance package.

‘Phased retirement’ allows one to reduce income and take part of the pension while continuing to work.

Service record

Your final pension will be calculated using your service record. It is worth checking regularly that Teachers’ Pensions (TP), who administers the Teachers’ Pension Scheme (TPS) for the government, or the Local Government Pension Scheme (LGPS), is holding this correctly. Your annual statement will show this, although it will be for March of the previous year. You can also view it by signing up for ‘My pension online’ with the TPS.

Many people have incorrect records and it can be a long and fraught process to get your record corrected. Your employer at the time of any missing service has to put this right. The increase in the number of separate employers and the increasing use of outsourced payroll services has made it more difficult to get the necessary documentation from previous employers, so do not leave this until just before applying for the pension. Those at most risk of incomplete records are those who have moved employer regularly or who have had breaks, such as a period of maternity leave.

Estimates

Estimates of potential benefits are not offered in advance by the TPS but there is a calculator that you can use on the TP website www.teacherspensions.co.uk Members of the LGPS should contact their local provider.

Nominations

Nominations are needed for death grants and survivor pensions, unless one is in a traditional, legal marriage or civil partnership. Make sure these are correct and up to date and that they fall within the guidelines on eligibility.

Application

You need to apply for your pension – resigning alone does not trigger it. Why not do the resignation and application together, ensuring consistency and giving due notice to both?

Resignation

It is necessary to resign your post if retiring; applying for your pension does not act as a resignation. Discuss your plans in good time with your employer and check your notice period. It has commonly been four months for heads, three months for other teachers and often shorter for support staff. Self-governing schools and colleges may have their own contractual arrangements that need to be followed.

Additional Voluntary Contributions (AVCs)

These funds can be accessed from 55 to 75 and do not have to be taken at the same time as the main pension, although contributions have to cease once there are no further payments to your main pension scheme.

Commutation

Commutation means giving up some of the pension payable from retirement and taking an immediate lump sum instead.

It can be used to give you a tax-free lump sum under LGPS and post-2007 TPS or to increase your lump sum if you joined TPS pre-2007. This decision has to be made when you apply for the pension.

An increased lump sum may help reduce income tax in retirement or may fund a special project, such as clearing a mortgage. But, on the other hand, one is giving up index-linked income for life and may find it hard to get a good return on invested monies.

Talk to a truly independent financial adviser before making this decision.

Returning to work

It is possible to do this after taking a pension. (You must be out of service on the day you take the pension.) It requires a proper cessation of employment, resignation and written acknowledgement and may have to be minuted by the appropriate governors committee. New employment requires a new contract. Auto-enrolment means that you will be re-enrolled in your scheme unless you opt out.

In the TPS there is no cap on earnings if an actuarially adjusted pension is taken. An age pension has a cap on subsequent earnings. The salary plus pension must not exceed the salary on which the pension was calculated or the pension will be reduced or stopped. LGPS members should contact their local provider for a ruling on any proposed new employment.

  • David Binnie is ASCL’s pensions specialist

Further advice is available at:

ASCL runs a series of retirement seminars in association with the Lighthouse Finance Group throughout the year. For more details, see www.ascl.org.uk/retirement_seminars

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