An explanation of how phased retirement works in the UK Teachers’ Pension Schemes, along with a warning about checking the value of the pension before taking phased retirement….(read more)
LEARN MORE ABOUT: Retirement Pension Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Phased Retirement – An Opportunity for Teachers’ Pension
As careers progress and individuals approach retirement, many professionals, including educators, consider various options to transition from full-time work to retirement. One such option gaining popularity in recent years is phased retirement. This article will discuss what phased retirement entails specifically for teachers, focusing on the benefits it offers to their pensions.
Phased retirement refers to a flexible approach, allowing individuals to gradually reduce their working hours while simultaneously receiving a portion of their retirement benefits. This arrangement is particularly appealing for teachers who have devoted significant years to molding young minds but are not yet ready to fully step away from the profession. It provides them with the opportunity to ease into retirement at their own pace, ensuring a smooth transition while sustaining a consistent income stream.
In the realm of education, phased retirement offers several advantages to teachers, notably regarding their pension benefits. Typically, teachers’ pensions are structured to provide financial security after a certain number of years in service. Phased retirement allows teachers to maximize their pension earnings by extending their service years while simultaneously receiving a reduced workload. This can result in a higher pension payout upon fully retiring, as their average salary calculation will incorporate their additional years of service.
Moreover, phased retirement can positively impact a teacher’s pension by contributing to a higher final average salary, which serves as the basis for calculating pension benefits. Many pension systems take into account the highest consecutive earning years within a specific timeframe, usually the teacher’s final years of service. By prolonging their career through phased retirement, teachers can work towards boosting their final average salary, potentially leading to a more substantial pension payout.
Additionally, phased retirement allows teachers to continue making contributions to their pension plans, ensuring the longevity and sustainability of the pension system. This benefits all participants in the plan, as teachers’ continued contributions help maintain the overall health of the fund and potentially increase its ability to meet future obligations.
Aside from the financial benefits, phased retirement has a range of advantages for teachers themselves. It provides an opportunity for experienced educators to share their wealth of knowledge and expertise with younger colleagues, contributing to the professional growth and development of the teaching community. Furthermore, phased retirement allows teachers to gradually adjust to the new challenges and hobbies they may wish to pursue in retirement, helping them maintain a fulfilling and purposeful life beyond the classroom.
In conclusion, phased retirement offers teachers a unique opportunity to transition into retirement gradually while benefiting from an improved pension outlook. It allows them to extend their service years, potentially increasing their final average salary and subsequent pension payout. By continuing to contribute to their pension plans, teachers also contribute to the overall sustainability and viability of pension systems. Ultimately, phased retirement provides teachers with the flexibility and financial security they deserve after dedicating their careers to shaping the future generations.
Hi Dave. Thank you so much for making the teachers pension clearer! My questions are about phased retirement.
When I reach 55 I plan to drop a day a week and start phased retirement. I can drawdown from my pension up to 75% to compensate for the drop in income. Please can you tell me the tax implications of doing this? If i drawdown 75% will I have to pay more tax than just 25%? Also am I correct in saying that if I did this I would receive 75% of my lump sum? Would this be actuarily reduced costing me thousands?
Also, if I used phased retirement from 55 to 60, will it narrow the choice for the best three years from the last ten if i fully retire at 60? For my final salary pension, the five years of phased retirement are unlikely to be my highest wages? Thank you.
Hello again David, Two questions please, if I may. For someone over 60 taking phased retirement, who is both in the final salary and average salary schemes, going part-time by dropping one day (20%) and taking 75% of their pension from the final salary scheme only. 1) What happens if they decide to fully retire in less than one year (I believe phased retirement requires one year of work while at 20%)? and 2) does the average salary pension continue to increase at 1/57 of the full pay figure or the 80% of the full pay figure? Thank you!
For the phased retirement (for someone say aged 61, ie over their NPA for the final salary scheme but below the NPA for the career average), you mentioned that you can choose to take part of each pension separately (eg nothing from the career average and 75% from the final salary…or…50% from both etc.) So, I guess one could take 75% from both. Is that right? Also, is there anything to be gained by just taking 75% pension from the final scheme and zero from career average? I am thinking that the career average will have the actuarial percentage reduction applied, so does that mean it is better left alone?
Hi David Is there a way that I can contact you please? Do you have an email address? Thank you
Thanks, that’s really very helpful. I have a question. Is there not another alternative to phased retirement (where one can take up to 75% of benefits for at least 20% reduction in salary, for one year, and where income must not be greater than before), which I have heard called ‘flexible retirement’ (which I think TPS simply consider as early retirement). This would involve taking all the pension and reducing salary by 20% or more (say by starting a part-time role). Have I got this wrong?
Hi Dave – I've just left this under the Hypothetical Calculation video you posted – but that was well over a year ago – so i'm not sure you are checking for any new comments /questions ?? I'd really appreciate a bit of advice – and I'm hoping this is quite a straightforward Q for you ? ( see below)
This has been very informative – thanks so much for the video – but could still do with some very basic advice. I had 26 years of service up to and incl Dec 2019 – with best three years being 2009-20011. I then came out of the TPS scheme in dec 2019 (not by choice) when I moved to another school, and have been out of it ever since. I have now been given a 2 day a week contract for a year – which may/may not be extended beyond that. I envisage working another 5/6 years – but most likely part time – and certainly nowhere near the salary levels of 2009-2011 !! Put simply should rejoin I the TPS scheme ?