A guide to pensions for teachers
Published on:
18 July 2023
Are you a teacher trying to plan for your retirement? You might have questions about the Teachers’ Pension Scheme and how it applies to you. In this blog post, we’ll delve into the details of the scheme and provide answers to some commonly asked questions, so you can make informed decisions about your financial future.
What is the Teachers’ Pension Scheme?
The Teachers’ Pension Scheme (TPS) is designed specifically for teachers and those working in teaching roles in the UK. It aims to provide teachers with a reliable, secure source of income during retirement.
It’s a defined benefit scheme, which is based on your salary and length of service rather than investments. Both you and your employer will pay into the pension. You’ll receive a State Pension as well as the TPS pension.
It can be a regular source of income during retirement, but you also have the choice to take part of it as a lump sum.
The scheme is governed by the Teachers’ PensionsOpens in a new window organisation and is one of the largest public-sector pension schemes in the UK.
How much does the Teachers’ Pension Scheme pay?
The amount you receive from the TPS will depend on various factors, such as your age, your salary, and the length of your pensionable service.
Most teachers who qualify are enrolled in the Career Average scheme, where the pension is based on a proportion of their salary earned each year. As of this year, if you’re in the Career Average scheme, you’d receive 1/57th of your pensionable earnings for each year of service. Keep in mind that there might be extra factors and adjustments involved.
Teachers’ Pension calculator
For an accurate estimation of your pension entitlement, use the Teachers’ Pensions online pension calculatorOpens in a new window This calculator can also tell you how much you can take as a lump sum.
How much will Teachers’ Pensions rise in 2023?
TPS pensions that are already being paid out increase annually due to the Pensions Increase (PI), which is applied to public service pensions.
PI is always applied on the first Monday falling on or after 6 April. PI in the 2023/24 tax year is 10.1%. This has been applied since 10 April 2023.
Index-linking
TPS pensions are index-linked, which makes sure that the value of pensions keeps pace with inflation over time.
How much do you pay into the Teachers’ Pension Scheme?
The amount you pay into your TPS depends on the amount you earn each month. If you earn more one month than you usually do, for instance because of overtime, your contributions might increase. People who earn less will also pay less into the scheme.
The contribution rates change yearly in April. In 2023, they were:
| Annual salary | Contribution |
|---|---|
|
Up to £32,135.99 |
7.4% |
|
£32,136 to £43,259.99 |
8.6% |
|
£43,260 to £51,292.99 |
9.6% |
|
£51,293 to £67,979.99 |
10.2% |
|
£67,980 to £92,697.99 |
11.3% |
|
£92,698 or more |
11.7% |
You can also pay extra into your scheme if you want to.
When can you take money from a Teachers’ Pension Scheme?
You can take money from your TPS pension at your State Pension age or age 65, whichever is the later date.
It’s important to note that the government may review and change the pension age requirements in the future, so it's worth staying updated on any potential adjustments.
You can also start drawing money from the pension and keep working in some circumstances, for example if you take phased retirement or if you’ve retired then returned to work.
Final Salary vs. Career Average schemes
Depending on your circumstances, there were two main pension schemes that could have applied to you: the ‘Final Salary’ scheme and the ‘Career Average’ scheme. The Final Salary scheme was only available to people who started teaching before 1 September 2015.
Since 2022, most of those people have been moved onto the Career Average scheme, which calculates your pension based on a proportion of your salary earned each year throughout your career. Some older teachers were able to stay on the Final Salary scheme if they were better off on it.
What happens to your pension if you stop teaching or take a break?
Taking a break in your teaching career can affect how much money gets built up in your TPS. If you have a break in your career, your pension will be based on the pensionable service you have accumulated up until the break. Once you return to teaching, your pensionable service will continue from where you left off.
However, there might be some extra rules and considerations depending on the length of your break and whether it’s a recognised parental leave or sabbatical, or unpaid leave or a career change.
What happens to your Teachers’ Pension when you die?
The TPS provides benefits to your loved ones in the event of your death. The specific benefits and eligibility criteria can vary depending on your circumstances.
If you were an active member of the scheme at the time of your death, your spouse or registered civil partner might be entitled to receive a survivor’s pension. This pension is usually a proportion of the pension you would have received had you lived until your normal pension age.
Oher dependents, such as your children or eligible cohabiting partners, might qualify for survivor benefits. It’s essential to keep your nomination of beneficiaries up to date with Teachers’ Pensions to make sure they’d receive these benefits in the event of your death.
