Teachers’ Pensions is the second largest public sector pension in the UK. You may be a new teacher entering the profession, deciding whether to opt in or out of the Teachers’ Pensions Scheme or looking at retiring soon.
In this article, we provide an overview of the Teachers’ Pensions Scheme and where you can look for additional information.
We have also published another article which looks at independent schools withdrawing from the scheme.
What is the Teachers’ Pensions Scheme?
Teachers’ Pensions is the organisation responsible for administering the scheme on behalf of the Department for Education (DfE). You can sign up as soon as you start teaching and receive a Teachers’ Pension number.
The Teacher’s Pensions website is a good starting point to familiarise yourself. It includes:
- A factsheet providing an overview of the Teacher’s Pension Scheme
- An overview of what your contributions will look like
- A selection of pension calculators
- An FAQ microsite
Documents on the DfE’s website relating to the scheme can be found here.
Edapt recommend getting in contact with Teachers’ Pensions if you have a specific query about your arrangements.
How does Teachers’ Pensions work?
A pension is simply a financial product. It is a tax free portion of cash, your employer pays into, as a way of saving up for your retirement. So essentially a percentage of your pay each month will be going towards your pension pot.
Teachers’ Pensions say the scheme is “a defined benefit scheme based on your annual pensionable earning, revalued each year, rather than a scheme reliant on how investments perform, so there’ll be no surprises when you come to claim your pension as you’ll know in advance how much you’ll be getting.”
What happens if I already have an existing pension?
If you are a career changer and already have a private pension you might be able to transfer it into your new Teachers’ Pension. The Teachers’ Pension website has more information on this topic.
Am I allowed to opt out of Teachers’ Pensions?
Yes. If you calculate you might struggle to meet the contributions or know you only intend on teaching for a short period of times you might decide to opt out of the scheme. Information on opting out can be found here.
How much do I need to pay in?
How much you need to pay in depends on salary, with lower-earning members paying in a smaller percentage of income. Contributions from 1 April 2021 are:
|Annual Salary Rate for Eligible Employment from April 2021||Member Contribution Rate|
|Up to £28,309.99||7.4%|
|£28,310 to £38,108.99||8.6%|
|£38,109 to £45,185.99||9.6%|
|£45,186 to £59,885.99||10.2%|
|£59,886 to £81,661.99||11.3%|
|£81,662 and above||11.7%|
Can I pay in extra amounts?
Yes. You can buy additional pension income in multiples of £250 a year up to a maximum of £6,500 a year. You can make an annual election to purchase faster accrual.
While the normal rate of accrual or growth in your pension is based on 1/57th of your earnings for that year, you can choose to pay a higher contribution rate of either 1/45th, 1/50th or 1/55th. Teachers’ Pensions provide more information here.
What happens when I retire?
Well done on reaching the end of what will have hopefully been a rewarding career in teaching!
Each month your pension will be paid into your nominated bank account. Your monthly pension payment will be made on the day before your birth date. So, for example, if you were born on the 7th month, your pension will be paid on the 6th of each month.
Each year, you will receive a P60, outlining the amount of pension you have received and the tax you have paid in that tax year. You pension is index-linked to protect it from increases in the cost of living. The increase are paid in April , on the same date as increases in state social benefits. They are based on figures provided by HM Treasury.
Additional information about what to do when you retire can be found on their website.
We have also published another article on teacher pay scales if you are trying to make calculations on your pension contributions.
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The information contained within this article is not a complete or final statement of the law.
While Edapt has sought to ensure that the information is accurate and up-to-date, it is not responsible and will not be held liable for any inaccuracies and their consequences, including any loss arising from relying on this information. This article may contain information sourced from public sector bodies and licensed under the Open Government Licence. If you are an Edapt subscriber with an employment-related issue, please contact us and we will be able to refer you to one of our caseworkers.