The Staffroom: Why you should check your pension without delay

My whole career has been one spectacular downward trajectory. Rather than soaring ever upwards, I have plummeted Icarus-like into the depths more than once – at least in terms of salary. I have done so happily and willingly because the life of an ordinary teacher is where the action is as far as I can see.

I like to think that’s where I’m able to make the most difference, but it has made a difference for me too, one I didn’t think much about at the time.

Recently, a colleague sat next to me in the staffroom with urgency. “’Dave, this might apply to you too,” he said. The sense of discovery in his voice felt like he was sharing some arcane secret, unrolling a tattered treasure map or uttering some long-hidden spell.

Since then, others in our staffroom have found themselves discussing this too. It’s opened a fair few eyes. So allow me to share it with you too.   

I well understand that pensions are a field into which even wizened teachers fear to tread. I am no financial advisor and my money nous would make a piggybank blush. It’s a complicated field and my grasp of it is shallow.

The contribution goes out at source, I long imagined, so I can just ignore it and it will all work out fine in the end. As the end approaches (for my work life, if not my life’s work), I realise the 27 years I’ve spent thinking like that might not have been wise.

You know all those messages you get telling you to check your pension statement? I am now learning that maybe you actually should. 

If you are as long in the tooth and lengthy in service as I am, your pension will be split into two parts and two pots.

There is the newer system based on a career-average calculation. It’s a pretty simple system. At the most basic level, the more you pay in, the more you get out. You just need to remember that you can pay more in if you can afford it.

The older pot, on the other hand, is based on a final-salary scheme. This is where you might well have problems if you have had a topsy-turvy career like mine. 

Not doing this could cost you tens of thousands of pounds

The final-salary scheme, probably the more lucrative of your two pension pots if you’re of my advanced age, takes for its calculations an average from the best three years of salary you have had over the past ten. 

But what happens if your best three years were more than ten years ago, say if you decided to step down from management for a final quiet decade?

Simple. You lose the higher three years. The old salary falls off the tail of your relevant period and no longer counts. In terms of your pension, it might as well have never happened.

Your lower later salary becomes the one that will be used instead, which could cost you tens of thousands of pounds. Do I have your attention now?

What if I told you there is a way to save those higher-paid years if you act quickly enough?

All you have to do is opt out of the Teachers’ Pension Scheme for a single month. Doing so will lock in the higher three-year salary so long as those three years fell within the decade before you opted out.

They will then be used for a hypothetical calculation of your final salary, even if you keep on teaching for another ten years. You lose a single month’s contribution but gain tens of thousands in pension.

In other words, you pay less and gain more. That’s a bargain. It’s also a no-brainer. You’ve earned it, so ensure it’s locked in.

I don’t know if I’ve managed to make pensions exciting. If I’ve encouraged you to check your pension statement, that’s enough.

If not exciting exactly, there is someone who can make pensions accessible. David Fountain is the teacher- expert on all this. Visit his website, and if you’re on Facebook, join his ‘Teacher Pensions – Teacher to Teacher (UK)’ private group.

Trust me, future you will thank you. You’re welcome.