My pension arrangements in the teachers' Scheme seem fairly adequate but is there any way I could improve them?
Yes. Under the new arrangements members are able to buy, prior to reaching their normal retirement age, additional annual pension of up to £6,500 in the NPA60 scheme and up to £7,000 in the CARE scheme
As well as paying into your Teachers’ pension scheme, you can also contribute to a stakeholder pension, a personal pension and to arrangements known as Additional Voluntary Contributions (AVCs) and Free Standing Additional Voluntary Contributions (FSAVCs).
These options allow you to make tax-efficient contribution that allow you to build up a separate pension pot in addition to your Teachers’ pension. These contracts are offered by a wide range of financial services providers and it makes sense to seek independent financial advice before proceeding with these types of arrangement.
Additional pension benefits can be purchased in multiples of £250. The value will be index-linked before and after they come into payment.
It should be noted that such purchases buy additional annual pension benefit only unless some of the value of the fund is commuted to lump sum at retiral.
Members will be able to buy additional pension benefits with a one-off lump sum or by spreading the payments of a number of years. Currently, whatever method is chosen, the payment normally attracts tax relief.
Members will be able to purchase either personal benefits only or personal and dependents' benefits.
Where members opt for the purchase of additional pension benefits by regular payments over a number of years the cost charged will be reviewed periodically. Members can purchase additional pension benefits over a maximum of 20 years.
How much will additional pension benefits cost?
This will depend on the number of £250 units purchased, the age of the applicant and whether personal only benefits or dependants' and personal benefits are purchased. The Pension Agency Website contains a modeller which will calculate the actual costs involved. This can be found at https://pensions.gov.scot/teachers/your-membership/increasing-your-pension
As well as paying into your Teachers’ pension scheme, you can also contribute to a stakeholder pension, a personal pension and to arrangements known as Additional Voluntary Contributions (AVCs) and Free Standing Additional Voluntary Contributions (FSAVCs).
These options allow you to make tax-efficient contribution that allow you to build up a separate pension pot in addition to your Teachers’ pension. These contracts are offered by a wide range of financial services providers and it makes sense to seek independent financial advice before proceeding with these types of arrangement.
Teachers’ AVCs from Prudential
The official provider of Teachers’ AVCs to the Scottish Teachers’ Pension Scheme is Prudential. Their scheme is designed with teachers in mind and offers:
- flexible options to take benefits from age 55
- tax-efficient contributions direct from your salary
- contribution levels you can control to suit your needs
- a broad range of investment options
- a wide range of cash and income options in retirement
- a comprehensive website to support your decision making
- online application forms
What if I have to retire because of ill-health?
The STSS provides for the paying of pension on grounds of ill-heath. This ill-health retirement does in certain circumstance allow for some enhancement of service but it is often inadequate, especially for a teacher who is comparatively young or has a small amount of service.
It must be very difficult to decide all these things. Can you give individual advice?
The SSTA can give you information but, in law, may not give advice on such financial matters. You can, however, obtain full independent advice from an independent financial adviser.
For further information please contact the Association's office.
