Taking early retirement

[granny grump]

My sister, a teacher for about 35 years is truly very unhappy in her job and is not particularly well, has been offered £14000 if she takes early retirement.

She has no partner but a son still living at home and likely to continue to do so who is on minimum wage.

She brings home £2600 per month and does not turn 60 for another 12 months. She still has a morgage of £37k which ends in November 2013 for which she pays £900 pm

She has asked me if I think that this is a good deal and I wondered if there are any financial brains out there who could give us their views

[woofgang]

what will her serps pension income be?

[buildersmate]

More importantly, what impact will it have on her Teachers' Pension (which should be available from 60?).
This sounds like a carrot of about 4 months salary, which for 35 years service doesn't sound too impressive to me - unless the pension is being paid at age 59 as if it was being taken at 60.
So what other carrots are in the deal?

[factor-fiction]

I assume she is contracted out of SERPS.

A few questions first:

When you say she 'takes home' £2600 pm is that after all deductions (tax, pension, NI)

When you refer to £14000, is that the annual pension? Can she get a lump sum as well or would taking a lump sum mean a smaller annual pension

Anyway, although you use the word 'offered', I can't see her being able to negotiate any more- that is the pension she will get if she retires now.

She can take a lump sum which she could use to help pay the mortgage over the next two years.

I'll come back after you've had a chance to answer my queries

[granny grump]

Thank you all - I have forwarded all these questions to her and when she has got the answers I will come back thank you again

[factor-fiction]

The main issue is whether the £14000 is a 'one-off' incentive payment for her to leave early (and then she gets a pension on top) or whether there is no one-off payment but a pension of £14000 pa.

[johnny37]

The rules for teachers should be the same for all teachers in the state sector. I suggest your sister gets a copy and asks HR how it is calculated. One factor is that any payment cannot be more than she would have earned of she had stayed. £14000 does not sound very much if she currently earnes over £30000. Private schools are different and can make their own rules. Its possible that £14000 is the statutory minimum (google statutory redundancy payment). It was a maximum of 20 weeks pay the last time I looked which works out around that figure. Private schoools are not known for their largesse.

[johnk]

That doesn't sound good to me. I', on about the same amount and got about 40K lump sum. What's her pension after the £12K

[granny grump]

From what she has told me £14k is in addition to her lump sum and pension. Yes it is less than she would have earned but she is so very unhappy that I am sure that it will be better for he rto take early retirement - as long as her lumpsum and pension start straight away. She needs to be sure of this

A couple of friends took early retirement and got nothing apart from the lump sum and pension

[johnny37]

The pension package and early retirement payment are unrelated. The first is paid by the pension fund. The early retirement payment is paid by the employer. In this case they pay out £14000 but save £31000 + NI. The difference in income is not that much as her pension will kick in straightaway. If what I have heard about teachers pensions is true she will be worth knowing! Still query the £14000 and find our where that figure comes from.