Is it ever too early for teachers to get retirement ready?

When it comes to planning for your future retirement, it is never too early to start.

Teachers lead busy lives - managing the demands of a busy work schedule and personal life can sometimes mean retirement planning is put on the back burner. However, putting plans in place early on can help to ensure that the golden years of your life are some of the most fulfilling.

Where to start

Perhaps one of the best places to start is by asking yourself how you envisage your retirement. What would you like it to look like and what provisions have you already put in place to help achieve your goals? What are the key steps you need to take to improve your chances of being able to retire how and when you want?

How much do I need?

This will involve thinking about how much income you will need to retire comfortably and where this will come from. Making a realistic assessment of your ongoing expenditure and any substantial one-off future plans you may have, is a good place to start.

A Teachers’ Pension should cover basic needs, and anything in addition to this will provide more financial freedom, and inevitably a more comfortable life in retirement.

According to the latest Retirement Living Standards report by The Pensions and Lifetime Savings Association, the minimum income for people living outside of London, required to cover the basic needs of a single person is £14,400, (£22,400 for a couple); the same report details that in order for a single person to live comfortably during their retirement – with greater financial freedom and some luxuries – they would need a minimum income of £43,100 per year (£59,000 for a couple).

Some teachers choose to enhance their retirement income by paying into a private pension. This can also be used to help bridge any income gaps between their planned retirement, but before their state pension starts for example.

When projecting retirement plans, it is important to take into consideration lifestyle changes. At present, you may be supporting your children through further education or paying off your mortgage. How would any changes in your circumstances impact your income and capital in retirement?

It may be helpful at this point to consider why you are retiring. Do you have any particular goals or something you wish to achieve through making this move – for example, standing down from full time work commitments, focusing on a hobby or dedicating more time to your family? Or opening up space to explore other passions and opportunities.

Funding your retirement

Teachers’ Pension Scheme (TPS)

Knowing exactly how much your TPS pension will give you in retirement is crucial in understanding how much further planning will be required to ensure that you reach your retirement goals, whatever they may be.

If you are a TPS pension scheme holder, the pension scheme you are in will depend on the date you joined the scheme. A good starting point here is to request your benefit statement by using the online portal relevant to your country’s scheme. This will provide an estimate of pension benefits you have accrued to the date of the statement.

Savings and investments

You may have other pension schemes with other providers, or investments and savings earmarked for your retirement. A Specialist Financial Adviser can help you to establish a realistic picture of what your future expenditure will look like, in terms of outgoings, lifestyle and general living costs. Comparing this with your projected future income helps to find out if you will have enough saved for the retirement you are hoping for.

Some teachers may not have reviewed their investments, savings and any private pension pots for any considerable length of time. A review can help to determine how the investment is performing, whether the risk profile of the investment is in line with the client’s own attitude towards risk, whether the charges are fair and comparable to other similar funds, if the investments remain in line with the client’s objectives and if there are any assets, are these readily accessible or do they need to be sold, such as property for example.

It is also worth considering inflation, if you have savings and private pensions. The TPS pension increases in line with Pension Increase (PI). If any other assets or funds are not managed effectively enough to offset the impact of inflation, your standard of living will erode in real terms - something else to factor in to planning.

Bear in mind that the value of investments can go down as well as up and you may get back less than you invest.

Tax

It is important to remember taxes – these can be substantial on your total pension savings if certain limits are exceeded. You need to be conscious of the amount you can contribute to pensions without exceeding your annual allowance for example. Tax can be complicated and can have a significant impact on financial planning – this is where professional input can be extremely valuable.

Tax treatment depends on individual circumstances and may be subject to change in future.

Seeking professional advice

Seeking the right professional advice, from a Specialist Financial Adviser who understands teaching and has experience in how the TPS pension system operates, can make a big difference.

Planning is key to getting retirement ready – the more you nurture and tend to your plans, the better the end result is likely to be. Regular review of your financial plans will keep everything on track and whatever your circumstances are, there are often multiple options available. This is where a Specialist Financial Adviser can help guide you to make the right choices.

If you would like support or guidance on understanding your financial position, speak to a Specialist Financial Adviser at Wesleyan Financial Services for a financial review. Charges may apply. You will not be charged until you have agreed the services you require and the associated costs.