Any change to your role, pay, employer or working hours has an impact on pension benefits, but as I discovered recently, teachers need to be particularly vigilant.
I met a client who was reaching the end of a teaching career and was fortunate enough to remain an active member of the profession’s final salary pension scheme.
Like many teachers, she had changed roles, schools and pay grades multiple times over, sometimes by choice and occasionally, through actions enforced by her employer. She had also taken a break following the birth of her children, returning part-time while they were young.
It seemed to me this journey would be representative of many teachers, particularly women with families.
The sums don’t add up
The teachers’ pension scheme is complex, having gone through many changes, meaning it is an administrative nightmare for those tasked with its operation. It is easy to see why a career journey like my client’s would only increase the burden, making it difficult to keep tabs on exactly how much pension an individual is entitled.
I don’t think my client’s working pattern is extraordinary, but I was shocked when she told me, after a full audit and comparison of her employment record and pension accrual, she discovered her pension payments had fallen a frightening six years’ short during her 30-year career.
This is a huge gap! Each year of service corresponds to one eightieth of your final salary pension and so, the missing six years represented 20% of her total accrued service. Had it not been for her determination to check the records forensically, rather than accepting the pension statement as a source of truth, she would have been enormously disadvantaged in retirement, which may last for another 30 years or more.
Check your pension contributions
If you are a teacher with an active or deferred membership of a final salary pension scheme and the experience above resonates, I would urge you to check your records.
Spend some time comparing your employment history with your pension contributions, to make sure you are not losing out on benefits to which you are entitled and have paid for handsomely.
You cannot afford to assume the accrual statement issued each year is accurate, if your employment history is complex. The reward for your efforts may be a significantly increased pension.
Preserving your three best years
My client’s complex working history also flagged up another wrinkle in the teachers’ final salary system.
‘Final salary’ is defined as an average of your three best earning years in the last ten. Whilst this is fine if career progression has meant your wages increased over time, it can catch out the unwary, if reduced hours or salary reductions have been imposed with age.
In my client’s case, she’d had periods of part time work and a reduction in pay, following an employer review – a situation I’m sure has been replicated many times across the country.
Having spoken directly to the Teachers’ Pension helpline, I was surprised and dismayed to establish that, although there are known workarounds to preserve years that may otherwise fall out of the calculation, they are forbidden from sharing them with members.
Again, you should be extremely cautious if this scenario strikes a chord. By flagging up the issues, I hope to buy you time to address the matter before it becomes a problem.
Let’s make sure this article reaches as many teachers as possible and acts as a catalyst for them to engage with their pension before it is too late.
Please seek specialist advice if you may have been affected by this issue. I am happy to investigate teachers’ pension contributions on your behalf, so don’t hesitate to contact me on (01246) 298181 or email: david.bashforth@belmayne-ifa.com
