If you are a qualified teacher working in a state-funded school here in the UK, you will probably have been enrolled automatically in the Teachers’ Pension Scheme. But do you know how much your pension will pay you when you retire?
| What is a Teachers’ Pension? | A ‘defined benefits’ pension scheme for teachers |
| Age range of Teachers’ Pension? | 16 to 75 years old |
| The ‘career average’ pension scheme is based on? | 1/57th of your pensionable earnings plus overtime each year |
| Can I opt out of a Teachers’ Pension? | Yes, you can opt out within the first 3 months of your contract |
The workings of the scheme are quite complex, but if you would like to find what your pension will be with ease, why not use a free, online teachers’ pension calculator?
Back in April 2015, the Teachers’ Pension Scheme underwent a significant change. A new scheme called the “career average” came into play alongside the existing final salary arrangement scheme. It meant that calculating your pension became a little more complicated, and is why using a teachers’ pension calculator helps, especially with the various factors you must take into consideration. Factors such as:
- Did you stay in the final salary scheme as a protected member?
- Did you transition when the 2015 changes took place?
- Did you become a tapered member?
- Did you participate in the scheme prior to 1st April 2012?
The teachers’ pension calculator, of which there are several versions, can perform the calculation for you with the minimum of fuss, providing you choose the appropriate option.
The career average arrangement and the teachers career average pension calculator
The career average arrangement is a scheme that is based on your pensionable earnings every year spread across the period during which you are a member of the said pension scheme.
For every year you work, you will accumulate 1/57th of your pensionable earnings. This should include any paid overtime. The pot you accumulate each year will be totalled to form the base of the pension you get when you retire. Your pension will be revalued or indexed annually. The build-up process re-evaluation happens each year as you work your way towards retirement.
You can use the teachers’ pension calculator career average to establish how much your pension is likely to be.
Are you thinking of retiring early?
If you are hoping to retire early, use the teachers’ pension calculator early retirement option by clicking here. You need to supply the following details:
- Your estimated final salary
- The date at which you hope to retire
- Whether or not you joined the scheme on or after 1st January 2007 (Yes/No tick box)
- The age you hope to retire at
This version of the teachers’ pension age calculator will indicate what your full pension and the lump sum will be, based on the fact that you are taking early retirement. It will also tell you the percentage of your early retirement pension when compared to your full, unreduced pension.
However, it won’t consider what effect things like additional pensions or extra voluntary contributions would have.
You also need to be aware that this calculator can only work with salaries above £5,000 per annum.
The maximum you can earn as a retired member
The limit you can earn in any one tax year before affecting your pension is your index-linked salary minus your annual pension. Your pension could be suspended if your net earnings go above this limit.
If after retirement you return to work, and your new employment is pensionable in terms of the Teachers’ Pension Scheme, your new employer will advise the Teachers Pensions (TP) team straight away, even if you choose to opt-out of the scheme for your new job. In some instances, the TP team might ask you to complete a Certificate of Re-employment.
If you are asked to do so but do not comply, it could mean your pension will be overpaid, and you might have to repay any excess.
More on understanding your annual teachers pension allowance
If you work a part of phased retirement, it won’t be necessary to complete the certificate of re-employment. However, if you have taken your final benefits post phased retirement, you must advise the TP team. But if your employer forwards details of your employment and salary to the TP through the MDC (Monthly Data Collection), a certificate of re-employment will not be necessary.
A certificate must be forwarded to the TP team for every tax year you work. You must also advise the team if your hours or salary change in any way.
Your pension could be suspended if you receive any age or premature final salary benefits.
If you are a recipient of career average benefits, re-employment will not affect them. The same applies if you took final salary benefits and were receiving Actuarially Adjusted Benefits. However, if you return to employment and then take age, ill-health, or premature retirement, your benefits could be affected.
The teachers’ pension is paid monthly in arrears. The first payment could be a partial one depending on when your pension started and your date of birth.
To get an estimate of your pension, make use of the teachers’ pension scheme UK calculator available on the TP website.
Automatic lump sums and custom conversions
In common with some other types of pensions, you can take up to 25% of your teachers’ pension pot in a one-off tax-free lump sum. However, it’s not always an automatic process. Most members will have to relinquish some of their pension to purchase this lump sum.
If you are anticipating retiring early and you want to plan, you can use the teacher’s early retirement pension calculator to estimate the size of your pension pot and, therefore, how much cash this 25% could represent.
If you joined the teachers’ pension scheme prior to 1st January 2007 and haven’t yet taken any benefits, repayment of contributions, or transferred out of your scheme, you will be entitled to an automatic lump sum valued at three times your pension.
If you’re not entitled to an automatic lump sum, and you’ve been paying into your final salary or career average arrangement on or since 1st January 2007, you can opt to convert part of your pension into a lump sum. To do this, you will have to give up £1 of your annual pension to generate £12-worth of the lump sum. You can calculate the maximum lump sum you can generate by multiplying your annual pension x30 and dividing it by 7.
If you want to take less than the maximum amount of the lump sum, you can use the lump sum calculator on the TP website.
How is teachers pension increase calculated?
Teachers’ pensions come under public service pensions, and they are subject to the same annual percentage increase as State Additional pensions. The increase is applied in April, and it is awarded based on the increase in the CPI (Consumer Price Index) for the 12-month period to September the year before.
Saving towards your retirement is one of the most important things you will do in life. It will determine your quality of life after you retire and there are no second chances. For peace of mind, and to take all the hard work out of your teachers’ pension final salary calculation, why not use the Final Salary Pension and Lump Sum calculator on the TP website?
FAQ
How do I calculate a teachers’ pension?
Your Teachers’ pension is calculated using a ‘career average scheme’ or ‘final salary scheme’. The career average scheme is based on 1/57 of your annual pensionable earnings, plus overtime and index linking. Also, active scheme members have a yearly revaluation plus an additional 1.6%. With the final salary scheme, a Normal Pension Age 60 salary pension is calculated by multiplying your service by your average salary and then dividing by 80; and lump sum equal to three times your pension. However, a Normal Pension Age 65 salary pension is calculated by multiplying your service by your average salary and then dividing by 60.
How many years do I have to work to get full teachers’ pension?
To qualify and receive benefits from a teachers’ pension, you must have completed 2 years of pensionable employment after 6 April 1988 or 5 years of pensionable employment at any given time. The qualification applies to the final salary scheme, career average scheme, or a combination of both.
Can I retire at 55 as a teacher?
Yes, You can retire at 55 as a teacher as the earliest age you can receive your retirement benefits is 55 (57 in 2028). However, you will face reduced benefits due to age and service level.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
