MONEY MATTERS


A subject not many of us ever discuss, but as teachers we


have some specific financial benefits that can support our dependents if the worst ever happens, or that can support us in the case of severe ill-health. Dorothy Lepkowska explains


N


O-ONE EVER thinks it is going to happen to them or their family. But there are times when life takes an unexpected turn and you will be glad of the security of knowing that you have made adequate provision for the future.


All teachers who pay into the Teachers’ Pension


Scheme (TPS) have “death in service” benefit of three times their average salary, which, in some circumstances, can also be paid after you have left service. This can benefit your dependents in several ways. If you are in-service, the lump sum will be paid


if you die in pensionable employment, or if you die within 12 months of leaving pensionable employment due to ill-health or if you die while on unpaid maternity, paternity, parental or adoption leave. If you are out of service and any of those


circumstances occur, then the lump sum is calculated in a different way and you will be paid the higher amount of either 3/80ths of your average salary for each year of service, or the value of the contribution you paid to the TPS plus interest at three per cent per annum to the date of death. If you die after retirement and have received a


pension of less than five times your annual rate of pension, a supplementary death grant amounting to the difference may be paid. When you die, as well as paying the death grant,


the TPS will pay pensions to your widow, widower, civil partner, nominated partner, children or other dependants. If you die in service or within a year of leaving


service due to ill-health and have not had any ill-health benefits, then a short-term pension of three months’ salary will be paid to your dependant/s. A long-term pension will be paid immediately after


the short-term pension stops if you have more than two years’ eligible service. This pension is increased annually in line with rises in the cost of living. The long-term pension is calculated at the rate of


1/160th of your average salary for each year of survivor benefits service. This is payable for life provided you have pensionable employment on or after January 1, 2007. If this is not the case then the pension will cease if the recipient remarries, enters into a civil partnership, or co-habits. Children need to be under 17 years-of-age to receive


any benefit. Those who are older must be below 23 years and in full-time education or training lasting at least two years without a break of more than one academic year. Benefits may also be paid to children who are incapacitated and dependent on you when you die. They will receive half of the adult’s pension to one child. If there are two or more children, the adult pension is divided equally between each child. A higher rate of child’s pension is paid if there is no pension payable to an adult dependant. Any service from January 1, 2007, also counts


for partner benefits, although a number of conditions must be satisfied before a pension can be paid. They include the stipulation that you must have lived with your partner in a permanent exclusive relationship for


Case study


Biology teacher Alan Walker became seriously ill with suspected bowel cancer in 1994, and underwent emergency surgery and treatment. Several years earlier he had been persuaded by a colleague to take out an income protection plan. He said: “I never really thought I would need it but I was worried about supporting


my family if I ever became ill. After the original diagnosis and treatment I went back to work at my school, but five years later the cancer returned and I needed further treatment. “This time, I had to give up work and was glad of the decision I took all those years


ago. After 26 weeks, I began receiving monthly payments which helped to cover the mortgage. The plan has now been paying out for eight years and will continue to do so until I reach retirement age in a few years’ time. It has meant that I’ve been able to support my children as they go through university and I feel like I’ve kept my self-respect and dignity since having to give up work.”


in association with


Long-term thinking


a minimum of two years, be legally free to marry or to enter a civil partnership, and you and your partner must be financially interdependent. You must also have two or more years’ service. Financial interdependence includes sharing


a household and being jointly responsible for its spending; having a joint bank account or mortgage, you have made wills naming the other as beneficiaries, or you have mutual power of attorney. You do not need to prove that you and your


partner are dependent on each other at the time you nominate them, though this will be checked on your death. Only service from January 1, 2007, will count automatically towards a pension for an unmarried partner, but if you were a member before that date you may be able to cover previous service by paying extra contributions after you have nominated a partner to receive benefits. Pensioners may nominate a partner but cannot purchase the service prior to their retirement. Because of the environment in which they work


and the often stressful nature of the job, teachers can fall ill, often over a prolonged period. Teachers can apply for ill-health benefits if they retire through ill- health, but you will have to provide medical evidence that your illness permanently prevents you from teaching. Ill-health benefits ca n be paid at two different


levels depending upon the severity of the illness; enhanced benefits will be awarded if you are assessed as being permanently unable to teach and unable to undertake any other gainful employment. Unenhanced benefits would be awarded if you are assessed as being permanently unable to teach but can do other work. Staff on long-term sickness may receive up to six


months’ full pay and six months’ half pay, under sick pay arrangements. However this stops beyond that and unless you have private arrangements in place then your only benefit entitlement may be to Employment Support Allowance at £65.45 per week for the first 13 weeks of assessment (there are different levels post the assessment period). You can make sure that you do not lose income by


taking out an income protection plan, which can be set up to provide benefits in line with your early payment through the employment contract. It could pay up to 60 per cent of your gross salary until your normal retirement age. According to official figures, fewer than five per cent of households have any income protection in place. A teacher who is off on long-term illness, with a salary of £30,000, would receive six months’ full gross


pay of £2,500 a month, followed by a further half-year on £1,250. If they had an income protection policy this would


then kick in, paying out around £1,250 a month. Generally these are quite different to the much- publicised and criticised payment protection plans associated with mortgages, which generally pay out only after a minimum period of unemployment, and only for a couple of years after redundancy. “It’s hard to get excited about income protection


but sometimes it’s the less glamorous details of life that make such an important difference to our future. Income protection is an essential corner stone of financial planning and choosing the right policy can enable teachers to maintain the level of income they received


before sickness or injury,” explained Simon Rake, national sales manager with Wesleyan for Teachers. He added: “The level of protection required depends


on individual circumstances and lifestyle requirements. There are a wide range of products available and the trick is to choose carefully to ensure the policy suits your own particular needs. It’s sensible to take professional financial advice to ensure you find the right cover for you at the right level, leaving you neither over nor under-insured.”


SecEd


• Dorothy Lepkowska is a freelance education journalist. Money Matters returns in SecEd on November 4. If you have a question related to your personal finances as a teacher, email pete.h@markallengroup.com


Protect your financial health from the effects of serious illness


Wesleyan for Teachers offer specially structured protection products designed to provide sufficient income should sickness or an accident prevent you from working.


Protection for you and/or your family


• Income Protection provides you with a percentage of your income if you are incapacitated due to illness.


Call us now on0800 316 6554


quoting reference 60488 and arrange a no-obligation personal review and receive


£20 M&S vouchers


FREE* Illustrative vouchers only


* Terms & conditions: For any teacher or related profession booking a no-obligation financial review by 30 December 2010. Offer based on one voucher per person and only 1 appointment can be booked during this particular promotion. No purchase is necessary. No alternative is available. Employees of the Wesleyan are excluded. If a meeting is cancelled you will not be entitled to the vouchers. You will be required to complete and return a confirmation card after your first meeting and £20 of Marks and Spencer vouchers will be sent to you within 14 days of the card being received by Wesleyan for Teachers.


Wesleyan for Teachers is a trading name of Wesleyan Financial Services Ltd, which is authorised and regulated by the Financial Services Authority. Wesleyan Financial Services Ltd is wholly owned by Wesleyan Assurance Society. Registered No. 1651212. Head Office: Colmore Circus, Birmingham, B4 6AR. Fax: 0121 200 2971. Website: www.wesleyanforteachers.co.uk. Telephone calls may be recorded for monitoring and training purposes.


• Mortgage Protection can pay off your mortgage in the event of a death.


• Critical Illness Cover can pay out a lump sum if you (or a family member who is covered) suffers a specified major illness.


• Life Assurance can pay off any debts and leave a lump sum to ease the financial burden on your dependants should the worst happen to you.


WFT-AD-48 10/10


SecEd • October 14 2010


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