Case Study 1 - Existing Teacher

Amerjit is 45. She joined the profession straight from university, age 23. She took a break to have her children and this resulted in a four year gap in service. She has a Normal Pension Age (NPA) of 60 and providing she remains in pensionable employment until she is 60, her pension calculations will be based on 33 years service. Assuming for calculation purposes a final salary of £37,000, the following is an illustration of what her benefits may be.

Under the new proposals she can commute an amount between the current 3/80ths and up to a maximum of 25% of the fund value into a lump sum.

This means that Amerjit could have a maximum lump sum of £81,765 i.e. an additional £35,976 on top of the 3/80ths based lump sum of £45,789.

For every £12 of additional lump sum taken, Amerjit’s pension would be reduced by £1. Therefore, if she decided to increase her lump sum by an additional £24,000 to a total of £69,789, her pension would be reduced from £15,263 a year to £13,263 a year.

Case Study 2 - Existing Teacher

Jim, who fully intends to return to teaching, has taken time off to look after his elderly parents. He hears about the changes to the TPS in the press. He has already been out of service for four years. He secures a part-time contract to teach in a local school from April 2007 to November 2007 and eventually returns to the classroom full time in the early part of 2009 and works to retirement. For Jim, all his service is calculated on the basis of NPA of 60.

Case Study 3 - New Entrant

Paul becomes a teacher in September 2007 aged 35 years and he retires in 2037 aged 65. Assuming a final salary for calculation purposes of £40,000 (using today’s values), he would be entitled to the following pension.

He can commute up to a maximum of 25% of the fund value into a lump sum. In Paul’s case he could have a maximum lump sum of £85,680. For every £12 of lump sum taken, Paul’s pension would be reduced by £1.

Therefore he could commute a maximum of £7,140 of his pension and receive a lump sum of about £85,680.