Guide 6: PHASED RETIREMENT

This guide will be of interest to members considering Phased Retirement (ie an option for gentler step into retirement by going through a stage that consists of part-time work and claiming part of the pension). The guide will contain a post introducing Phased 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 Phased Retirement

TAKING PART (BUT NOT ALL) OF YOUR PENSION = PHASED RETIREMENT

A 2-minute video primer from TP: https://www.youtube.com/watch?v=YTQNgBS1IeE

Key Features of Phased Retirement:

  • * ABATEMENT: Phased Retirement is NOT subject to abatement rules.
  • * CONDITIONS: Requires a drop in salary of at least 20% (compared to the salary in the 12 months leading up to the date Phased Retirement begins, though any ‘normal’ pay rises are ignored).
  • You must be 55 or over BEFORE the salary drop takes place.
  • The application for Phased Retirement must be received within three months of the drop in salary.
  • * PERMISSION: it requires a co-operative employer as Phased Retirement will most likely involve dropping at least one day (ie going part time) for at least one year. After completing 12 months of Phased Retirement, you can return to a higher salary and/ or full-time work if you wish.

NOTE 1: If you are over NPA and opt out of TP for any reason, your ‘Entitlement Day’ for Normal Age Retirement is triggered and you will not be able to take Phased Retirement.

  • * CLAIM AMOUNT: You can claim between 0% and 75% of any of the TP pensions scheme accounts you hold.
  • * ACTUARIAL REDUCTIONS: If taking a proportion of your pension(s) earlier than NPA, usual actuarial reductions apply on the part of your pension you have claimed.
  • * 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: There is no qualifying period to be eligible to make further contributions to your CA pension.

More information: https://www.teacherspensions.co.uk/members/planning-retirement/types-of-retirement/phased-retirement.aspx

The next sections in this guide will be links to David Fountain’s videos, website posts and spreadsheets that relate to Phased

An Explanation of Phased Retirement

David Fountain also highlights some potential ‘traps’ to look out for:

  1. Taking the 20% reduction in salary by dropping responsibility.
  2. The 20% drop in salary must occur after turning 55.
  3. Application for Phased Retirement must take place within 3 months of the drop in salary starting.
  4. Having a Method B that is close to, or falling out of, the ten year window.
  5. Having a previous break in service prior to 1st April 2022 and therefore a hypothetical calculation. (see Guide 4, section: ‘What is the ‘HYPOTHETICAL CALCULATION’ and How Might It Affect You?’)

Phased retirement:
https://www.youtube.com/watch?v=pk7Wuynelqs

PHASED RETIREMENT FOR THOSE OVER 60 AND IN THE FS80th/NPA60 SUBSCHEME

This set of videos and website posts all cover the Phased Retirement specifically for those who are:

  • Over 60 AND
  • In the FS80th/NPA60 scheme

Much of the content is repeated with the same concepts phrased in different ways. This is to secure understanding. The links have been arranged in order of increasing complexity.

1) A short post from David Fountain’s website with a link to a 7.5 minute video:
https://dfountain.co.uk/over-60-work-less-get-paid-more/

2) An 11.5 minute video from David Fountain:
https://www.youtube.com/watch?v=laH9eWCbHcU

3) A 24 minute video from David Fountain:
https://www.youtube.com/watch?v=omPUVMhyPBk

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