Should I retire earlier from teaching to avoid a hit to my pension?

In August, I had considered quitting teaching. My full-time teaching career has been at local colleges from 1994 to 2001. I’ve also worked at my current job since 2001.

It has been my observation that teachers’ pensions is changing how it calculates their final pensions starting in April 2022.

The Teachers’ Pension Scheme also stated that the pension age for all its members will increase to 65.

Plan ahead: Do I need to retire from teaching earlier in order to prevent unfavorable new rules that could affect my pension?

My belief was that I could retire as a protected member when I reach 60 (I turned 60 in October).

TPS said that they will calculate final pensions using the average wage, rather than the final wage.

What will this mean for me? What financial advantage will I get if I choose to retire by the end of March 2022 instead of August 2022 like I originally thought?

All information is welcome. TPS claims that we have protection when someone calls, but the website does not mention this.

SCROLL DEEP TO ASK STEVEN READ MOREQUESTION ABOUT PENSION   

Steve Webb replies: Teachers’ pensions, which are part of the public service system, have undergone major changes over recent years. It is not surprising that these changes could affect your life.

You can read more about the details below. However, the good news here is that any service that you’ve built should not be affected.

You may recall that in the past public pensions systems had pension age normal well below 65.

Steve Webb: Ask the ex-Pensions Minister about your retirement savings. Use the box below to find out more.

In the NHS, civil services, and teaching, 60-year-old pensions were quite common. However, pension plans for uniformed service (military and police), often had lower retirement ages.

These were usually ‘final income’ pensions, meaning that the amount received was a proportion of your salary. This is based upon your tenure in the scheme.

2011 saw the release by the Coalition government of the findings of an independent review, which was chaired and conducted by Lord Hutton. The report recommended radical changes to the pensions system.

The reforms had two major elements: future pension ages of public service pension schemes will be linked with the state pension age and future pensions will be based more on your average earnings throughout your career than on your final salary.

The above proposals were made law, and most of the schemes are now in effect.

Changes like these are generally only applicable to the ‘future services’.

Also, even if your pension was due by 60 years, it doesn’t automatically become payable unless you wait at least five more years.

While years of membership may increase your entitlement to pension at 65 or later, you still have 60 days to receive the pension that’s already ‘in-the bank’.

You can also take any new rights to pension you have that become payable at full payment at 65, but at a lower rate.

The Government created some temporary protection to ensure that those who are under 10 years old and still have rights under the existing rules were not affected by the 2015 changes in the pension rules.

This was challenged by the courts on grounds of age discrimination.

One year old workers would be able to switch immediately to the new rules while those over the age limit would remain on the current rules throughout their entire working lives.

In what’s now known as the McCloud judgement, the courts accepted this challenge. 

The government agreed to an “fix” to address this discrimination.

The new changes will be applicable to all future service starting in April 2022. For the time period April 2015-2022, workers will be granted whichever pension they prefer at retirement.

You should remember one thing: even though things may have changed in April 2022 it means that all services in 2022/23 after that date will result in a pension that is payable according to the new rules.

The pension you’ve already saved should not be taken away.