February 2018

The know zone

  • Bold beginnings?
    At last year's ASCL Annual Conference, Her Majesty's Chief Inspector (HMCI), Amanda Spielman, announced that Ofsted would be undertaking a large-scale review of the curriculum. The review's first report focused on the Reception Year and was published in November. Julie McCulloch looks at what it had to say. More
  • Securing your future
    Managing Director of Lighthouse Financial Advice Ltd Lee Barnard, shares tips and information on future proofing your pensions. More
  • You want more?
    Supervising the lunch queue? Shifts as a security guard and car park attendant? It shouldn't happen to a chartered accountant... unless they are a business leader in an academy, of course. More
  • Leaders' surgery
    Hotline advice expressed here, and in calls to us, is made in good faith to our members. Schools and colleges should always take formal HR or legal advice from their indemnified provider before acting. More
  • Careers guidance
    The government wants every school and college in England to have a dedicated careers leader and it has published a careers strategy to highlight this. Here, ASCL members share their views on these plans and on what more can be done to improve careers guidance. More
  • Managing expectations
    Stephen Rollett says preparing for inspection doesn't have to be a difficult process. Here, he shares his top tips to help you through the visit and beyond. More
  • Uncharted waters
    As the government publishes its long-awaited action plan and consultation on T levels, Kevin Gilmartin examines the big issues that the government needs to get right. More
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Managing Director of Lighthouse Financial Advice Ltd Lee Barnard, shares tips and information on future proofing your pensions.

Securing your future

Accessing additional pensions – what you need to think about

If you have a defined contribution pension (whether from previous or current employers), pay additional voluntary contributions (AVCs) or if you have a personal pension, you need to think carefully about how you access it, as wrong decisions could have costly and far-reaching consequences.

What can you do with your additional pension?

Exchange it for an income for life and buy an annuity Once you do this, you can’t change your mind, so you need to think about whether the income you get will keep pace with inflation – while it may cover your expenditure now, can you be sure it will do so in 10 or even 20 years’ time? However, buying an annuity may make sense if your pension from the Teachers’ Pension Scheme (TPS) or Local Government Pension Scheme (LGPS) won’t cover your regular expenditure when you retire.

Take all the money out

Only the first 25% of the money you take out is tax-free. You will pay income tax at your highest marginal rate on any additional money you take out. You should therefore plan carefully so you don’t pay more tax than is necessary. For instance, if you pay higher-rate tax now but will pay the basic rate when you retire, it may make sense to delay taking out any more. Also, clearly, the more you take out, the less you have for future needs.

Leave all the money in

You could do this if you have enough income from other sources, that is, from the TPS or LGPS, and if you want to leave your pension fund to your loved ones.

A combination of the options above

You could use part of your fund to secure the additional income you need and then draw the rest as income or capital as and when you need it or want to treat yourself. This may suit you if your teachers’ or local government pension provides you with enough income to cover your regular expenditure.

What you need to think about:

  • Is the amount of income you need (and want) likely to increase or decrease at any time?
  • Do you want your spouse or other dependants to receive income if you die before them?
  • How healthy are you?
  • Do you have income from other sources, or other assets?
  • What will happen to your pension fund when you die?
  • What affect will your choice have on the amount of tax you will have to pay?
  • Might you run out of money? If you did, would your pension from TPS or LGPS, plus your state pension, give you enough income?

Beware of the lifetime allowance

The lifetime allowance (LTA) (currently £1 million, rising to £1,030,000 on 6 April 2018), is the total amount you can accumulate in pensions without having to pay an excess charge. While this sounds high, many education professionals are likely to exceed it.

Your pension is measured against the LTA when you start drawing it. To work out whether you are likely to be affected, multiply the annual income you will get from your TPS or LGPS by 20, and add to this the value of your retirement lump sum, AVCs and other pensions.

If your TPS or LGPS pension exceeds the allowance, the scheme pays the excess charge and reduces the excess portion of your pension by 25%. The rules are different if you take your pension because of ill health. If your other pension savings push you over the LTA, you will have to pay the excess charge yourself.

If you think you may be in danger of exceeding the LTA, you should take advice from a financial adviser.

The value of your investments can go down as well as up, so you could get back less than you invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. The Financial Conduct Authority (FCA) does not regulate tax advice that does not contain an investment element.

Take professional financial advice

It makes sense to talk to a professional financial adviser before accessing your pension, preferably one who specialises in advising education professionals.

Lighthouse Financial Advice Ltd, ASCL’s premier partner for personal financial advice, has been providing members with impartial, practical, affordable financial advice since 2007.

For further information visit www.lighthousegroup.plc.uk/affinity/ascl

Your CPD

Financial Planning for Retirement Seminars – find out more and book your place here www.ascl.org.uk/retirementseminars

Lighthouse Financial Advice Limited is an appointed representative of Lighthouse Advisory Services Limited, which is authorised and regulated by the Financial Conduct Authority. Lighthouse Financial Advice Limited and Lighthouse Advisory Services Limited are wholly owned subsidiaries of Lighthouse Group plc. Registered in England No. 04795080. Registered Office: 26 Throgmorton Street, London, EC2N 2AN.