Planning for retirement is something that many of us put off until we are almost at the age of retirement. Pensions Specialist Stephen Casey says it’s important that members prepare well in advance to avoid any nasty shocks.

Retiring thoughts

Recently, I was invited to present at a pensions seminar for senior school leaders. The night before the seminar, I met a new headteacher, in his early forties, who said to me he didn’t think he needed to go to the seminar as he wasn’t due to retire for a long time so “there would be little point”.

I asked him when he had been appointed to his new role.

“I started last September,” he said.

“Ah, so you haven’t had a pay rise in the new job then?” I asked.

“Of course there has. My salary has gone up by xxx.”

I said, “So, you aren’t at all bothered about your Annual Allowance then?”

He replied, “What’s that?”

And there we began quite a long and detailed discussion regarding Annual Allowance, when he would like to retire, the age at which he may receive his state pension, the new pension scheme (the career average scheme) and, finally, Lifetime Allowance – all extremely important elements that every member should be considering right from an early stage in their career.

The next morning, he came to the seminar and then followed up the topics covered with a phone call and a consultation with me.

Be prepared

As an ASCL member, you are entitled to free advice regarding your teacher’s pension or your local government pension. Many members, however, leave it too late and usually only take up this advice as they near retirement.

In the past, employees got on with their jobs and just left their pensions alone knowing that when they came to retire, a healthy pension would be there waiting for them. Those days are now long gone and we need to be more aware of our pensions and the plans for retirement that we may have in mind. In fact, the earlier you begin to look into your pension and start to take control of its growth, the greater the chance you will have of being in control of your destiny regarding your retirement.

There are several key points that you need to be aware of about your pension, including:

• at what age you can take your pension if you are a member of the Teachers’ Pension Scheme
• whether early retirement at 55 may or may not be for you
• the implications of joining the Career Average Revalued Earnings (CARE) scheme
• the flexibilities and opportunities of the Final Salary and CARE pension schemes
• that a pay rise of more than £3,500 could leave you with an increased tax bill
• what the Lifetime Allowance is and how you can mitigate any liabilities

We live in times where the government is currently consulting regarding raising the state pension age beyond the age of 68, which has already been tabled. This will have an impact on all members who join the new pension scheme, which is currently anyone under the age of 52.

Most members are also unaware that their final salary scheme runs alongside the new pension scheme and that when they do decide to retire, they must take both pensions at the same time. This will either affect the value of their pension or the age at which they may decide to take retirement, to offset any loss that occurs.

The CARE scheme offers many opportunities to increase the value of your pension in very flexible ways. By changing your contributions, you could gain greater control of your retirement date; for example, if you were to increase your pension contributions, you may be able to retire earlier with a small loss.

In future, any teacher who has a relatively long career in teaching will likely exceed their Lifetime Allowance. However, there are a number of ways that you can manage your pension and retirement to ensure you do not pay any unnecessary tax on top of your pension. For example, taking actuarially reduced benefits or increasing your lump sum can reduce your tax liabilities.

Pension advice, guidance and events:

If you would like pensions advice, please call the ASCL Hotline on 0116 299 1122.

Stephen Casey has updated our Guidance Paper on Pensions and Tax Liability. Download the guidance paper online www.ascl.org.uk/gp/pensions-tax-liability

In addition, Stephen together with a financial adviser and newly retired members will be leading a seminar on Financial Planning for Retirement on 8 February and on 12 May in Leicester – book your place online www.ascl.org.uk/events/fp-retirement

Stephen Casey is ASCL Pensions Specialist

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