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Teacher's Pensions & early retirement/ re-employment

Hello

I was wondering if anyone had any pension knowledge. I have had an employee approach me today he states he has been in touch with the  pension provider and they have told him if he retires he can claim his lump sum and then literally we could re-employ him in a few days?

I have never heard of this at all but he seems adamant that if the school agrees that is what he would like to do?

Anyone have any thoughts on this or come accross a situation like this before?

Any input much appreciated

thank you

Freya

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  • Freya
    Since the abolition of compulsory pension ages - the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 - this situation is happening more and more.
    In the old days, people would retire and simply receive a regular annuity once in retirement. The new regulations allow them to "draw down" capital, at varying intervals, as and when they want it (simplified explanation of a very complex situation), thus retaining flexibility on how much they receive and when.
    The consequence is that "yes" people can now work in retirement, but the taxation of their income will also take into account the pension amounts they receive. Also, the amounts that they will be able to contribute into pension schemes whilst working in retirement is strongly capped.
    These are the broad outlines and much will depend on the specific situation of the person and the rules of the particular pension plans. I suspect a vanilla, simple answer will not be possible on this forum and that you'll need to pay to get specialist advice - happy to be proved wrong if someone else can chip in .....
  • In reply to Ray:

    Thank you that helps me greatly at least letting me know it is legal! I will take further advice I think!
  • Hi Freya
    It is legal, although it would be completely new service e.g. no continuous service etc.

    However, he may want to check again as if he is receiving a pension from Teachers Pensions, he does have to declare to them if he starts working again. They may well then stop his pension depending on the amount he earns so he could achieve nothing other than lose his continuous service.

    www.teacherspensions.co.uk/.../returning-to-work.aspx
  • In reply to Freya:

    There are typically options to retire early (ie before the Scheme's normal retirement date) in which case there will be an actuarial reduction for early payment unless it's accepted by the Scheme as an ill health / personal incapacity retirement.

    Alternatively, anyone not already a pensioner as Ray says can now swap their lifetime / survivors pension for a (taxed but can be or seem very substantial) lump sum and then invest the lump sum or draw chunks of it down to support them in retirement and hope that it lasts their lifetime and doesn't run out. In effect they are gambling on how long they are going to live - if it's only ten years or so, then theyre in the money but if it's 30 years or so then they may wish they'd never done it. Other than small transfers, they must by law take advice from an Independent Financial Adviser (who will take their pound of flesh throughout)

    You need to find out from Teachers Pensions the precise rules that apply. They used to provide excellent service but are now outsourced so no longer in my experience. For example I believe they have particular rules about early retirees getting re employed afterwards: it's absolutely vital that all the unique particular Rules of the Scheme are obtained understood and followed.
  • In reply to David:

    (crossed with Teresa's useful specific link and guidance)