This guide will be of interest to members considering Normal Age Retirement (aka Age Retirement). The guide will contain a post introducing Normal Age Retirement by outlining its key features. The rest of the sections in the guide will be links to David Fountain’s videos and website posts related to this topic.
Key Features of Normal Age Retirement
TAKING YOUR PENSION AT, OR OVER, NPA = NORMAL AGE RETIREMENT
Key Features of Normal Age Retirement (aka Age Retirement):
* ABATEMENT: Abatement rules apply if you continue to work in a TP-eligible job. Abatement rules do NOT apply to work that is not TP eligible. Abatement only applies to the final salary schemes. Career Average pension is not abated but is used in the abatement calculation.
* CONDITIONS: You must be at, or over, NPA for the pension schemes you are claiming. You must be out of ‘pensionable service’ on the day you claim your pension to start. This can be achieved by having a break in contract OR being opted out of the TP for the month in which your pension starts. (The latter part applies in England and Wales but may need to be checked for other countries).
* PERMISSION: You don’t need your employer’s co-operation or permission to claim Normal Age Retirement for JUST the schemes where you have reached NPA. Opting out for a month or a break in employment triggers your ‘Entitlement Day’. If you are in other TP schemes where you haven’t reached NPA, you can leave them deferred. If you want to take any other pension where you haven’t reached NPA, see the section on ‘Early Retirement’.
* PENSION CLAIM: You can claim the scheme(s) you have reached NPA for and defer (leave) other pensions with a higher NPA for later. For example, once you turn 60, you can take your FS80th/NPA60 without any actuarial adjustment (ie Normal Age Retirement) and defer your Career Average pension.
* ACTUARIAL REDUCTIONS: No actuarial adjustments are applied to pensions taken at NPA.
* AUTOMATIC LUMP SUM: Only the FS80th/NPA60 has an automatic lump sum (3 x annual pension). The FS60th/NPA65 and Career Average scheme do NOT have automatic lump sums.
* OPTIONAL LUMP SUM: In ALL TP schemes, you can opt for an optional lump sum. Each £1 reduction in your index-linked annual pension is exchanged for £12 in one-off, upfront lump sum. This facility to take an optional lump sum also applies for the FS80th/NPA60 that already includes an automatic lump sum.
* ACCRUING MORE PENSION: In order for pension contributions after Normal Age Retirement to qualify as CA, you must complete at least 12 FULL months of further employment according to the terms of your contract. If you do less than 12 FULL months, your pension contributions will be allocated to a less favourable ‘Short Service Annuity’. (This is the same as for Early Retirement (but can be avoided by taking Phased Retirement).
More information:
The next sections in this guide will be links to David Fountain’s videos, website posts and spreadsheets that relate to Phased Retirement.
ABATEMENT, SALARY-of-REFERENCE, EFFECTIVE DATE and ‘THE LIMIT’
It is really important to have an understanding of the above concepts if you claim your Final Salary pension at, or after, NPA AND intend to continue in a TP-eligible job. The concepts apply even if you have a break from your TP-eligible job and return to another TP-eligible job in the future.
ABATEMENT:
* Only applies to teachers who claim their pension at, or after, NPA AND remain in a TP-eligible job. Does NOT apply to Early or Phased Retirement.
* Is a mechanism whereby teachers who claim their pension at NPA, or after, AND remain in a TP-eligible job can only earn a capped amount of salary + pension before the pension is abated (cut off).
* Applies to each financial year.
* Only Final Salary pension is subject to abatement. Career Average pension cannot be abated but is used in abatement calculations.
SALARY-of-REFERENCE (S-o-R):
* A fixed and unchanging number based on the highest revalued salary used in calculating the ‘Final Average Salary’.
NOTE: The ‘Final Average Salary’ is used in the final salary calculation. It is linked to the Salary-of-Reference but NOT the same thing.
S-o-R EFFECTIVE DATE:
The date the Salary-of-Reference is effective from.
THE LIMIT:
* Is the Salary-of-Reference increased by an inflation multiplier relative to the S-o-R Effective date.
* Rises every financial year in line with inflation.
David Fountain explains these concepts in further detail in this 10-minute video:
https://www.youtube.com/watch?v=d0qlSKWUSzY
You can do ‘File -> Make a Copy’ of David Fountain’s Abatement Limit Calculator spreadsheet and put in your own figures from your TP statement to work out your Salary-of-Reference here:
https://docs.google.com/…/1PF6FxnxXjL5bBcQZYk8B…/edit…
Further information from TP website:
Normal Age Retirement: https://www.teacherspensions.co.uk/…/normal-age…
Return to Work:
https://www.teacherspensions.co.uk/…/return-to-work.aspx
Over 60 AND Continuing to Work Indefinitely
A GUIDE FOR TEACHERS OVER 60, IN THE FS80th/NPA60 and STILL WORKING FOR THE FORESEEABLE FUTURE
David Fountain talks to a small sub-group of teachers about things to look out for once they are:
i) over 60 AND
ii) in the FS80th/NPA60 sub-scheme AND
iii) still working in a TP-eligible job and intend to continue to do so for the foreseeable future.
https://www.youtube.com/watch?v=omPUVMhyPBk
FINAL YEAR TEACHERS AND OVER 60 AND IN THE FS80th/NPA60
Could you improve your pension by opting out partway through your final year?
David Fountain talks to a small sub-group of teachers about a potential way to optimise pension income for teachers who:
i) are over 60 AND
ii) are in the FS80th/NPA60 TP sub-scheme AND
iii) are still working in a TP-eligible job but in their final year AND
iv) have a salary that is stable and not going to rise significantly in the final months between April and August.
These two video look at how you can access a few extra months of your Final Salary pension and avoid abatement in the final year of employment BUT at the sacrifice of not adding to the Career Average pension for the last 5 months or so.
NOTE: The following videos were made a couple of years ago so whilst the numbers used in the examples are out of date, the concepts discussed hold true.
i) 13-minute video from David Fountain: https://youtu.be/Oapk0-9hZQQ
ii) 17-minute video from David Fountain covering many of the same concepts as the first video: https://www.youtube.com/watch?v=NyZsy_KSnlA
This page details the regulations that allow you to claim your pension WITHOUT leaving employment: https://dfountain.co.uk/entitlement-day/