Teachers' Pension Scheme: Your retirement options explained

Written by: Simon Rake | Published:
Image: Adobe Stock

The pandemic has driven many school leaders to think about quitting, while the cost-of-living crisis is forcing others to consider their options. Simon Rake answers some common questions about the Teachers’ Pension Scheme

For teachers and school leaders whose pay increases have trailed behind inflation for years, the cost-of-living crisis is proving especially difficult.

Costly energy bills, rising mortgage rates and expensive weekly food shops are all putting pressure on already stretched pay packets.

At the same time, the pandemic and the stress of school leadership is forcing many leaders to consider their options too.

Polling from Wesleyan Financial Services shows that 1 in 6 of the 302 teachers who responded would delay their retirement to help them through the current crisis, while 1 in 10 would look for a better-paid teaching job.

Meanwhile, research by the Universities of Oxford and Nottingham in 2021 involving 1,500 school leaders found that two in five (40%) planned to leave the profession early within the next five years, rising to 46% among primary leaders (Greany et al, 2021).

With two in five teachers in the Wesleyan research saying that they expect their financial situation to get worse in the next 12 months, let’s look at some commonly asked questions by teachers who are considering their options for retirement.

Can I retire early?

The TPS provides flexible options for early retirement from the age of 55, but bear in mind that your pension income will be lower if you retire before your Normal Pension Age (NPA).

That is because the pension pot you have built up will be smaller but must last for longer, so the regular payments you receive will be reduced.

In most cases, if you joined the TPS before January 1, 2007, your NPA is 60 and if you joined after that date, your NPA is 65.

You need your employer’s permission to retire early, but if they don’t agree, they can only delay your early retirement by six months, after which you are entitled to leave.

Can I delay my retirement?

You can delay your retirement up to the age of 75 and continue contributing to the TPS while you work.

If you continue teaching after your 75th birthday, you will automatically start being paid your pension and you will stop accruing any more money into your pension pot.

What is phased retirement?

Another option is phased retirement, where you move to a less senior position or reduce your hours, while still contributing to the TPS.

From the age of 55, you can take up to 75% of your pension while you continue to work, as long as your new salary is at least 20% less than your previous wage.

If you start taking your pension before your NPA, it will be reduced, just like if you took early retirement. However, if you delay it until after your NPA, you won’t face any reductions.

What if I leave education but continue to work?

If you leave teaching for a new career, you can leave the accrued pension benefits you have built up in the TPS and start claiming it when you reach your NPA, or from 55, though your income will be lower, just as if you took early retirement. If you join a new pension scheme in your new job, you may be able to transfer your TPS pot to your new scheme.

How will my pension be calculated?

If you retire early or take phased retirement, your pension will be reduced to account for the fact that you stopped contributing to the scheme before your NPA.

How much it is reduced by will depend on factors including how early you retire, how long you have been in service, when you joined the TPS and more.

Typically, if you have worked for at least 25 years and decide to retire at 55 instead of your NPA of 60, you can expect your annual retirement income to fall from around £9,200 to around £7,650.

Conversely, if you delay your retirement after your NPA, your pension could be increased.

Whatever your circumstances, the TPS provides a free online calculator that will provide an estimate of what your pension will be.

Is there help available?

Getting support from financial advisers that understand the particular challenges teachers face can be a huge help. Whether you are starting out in a new role or getting ready to retire, getting specialist support is always the best way forward.

  • Simon Rake is head of education at the Wesleyan Financial Services. The details in this article are for information only and do not constitute financial advice. Visit www.wesleyan.co.uk/teachers

Further information & resources

  • Greany, Martindale, & Thomson: Survey results: School leaders’ health and career plans, 2021: https://bit.ly/44OROZ6

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