Teachers' pension scheme: everything you need to know

Since 1 April 2022, all active members of the teachers’ pension scheme now build up their pension benefits in the career average scheme.

The final salary scheme officially closed on 31 March 2022, meaning that new accruals after this date are under the career average scheme.

Members who were part of the final salary scheme before the closure continue to retain their benefits under that scheme, but new pension benefits are accrued in the career average scheme.

What are teachers’ pensions? 

The Teachers’ Pension Scheme is a ‘defined benefits’ scheme that allows both you and your employer to make contributions towards your retirement.

Your monthly contributions depend on your salary and when you joined the scheme.

Up until 31 March 2022, members of the scheme were classified into four categories, which determined how their pension benefits were accrued.

These categories influenced whether your pension was based on your final salary or your career average earnings. However, since 1 April 2022, all active members now accrue pension benefits under the career average scheme.

Here’s a breakdown of the four categories that were in place before the change: 

• ‘Protected’ scheme members: You were in this scheme if you were an active member before 2012 and were 10 years or less from your pension age
• ‘Tapered’ members: You were a member before 2012 and were less than 13 and a half years before your pension age
• ‘Transition’ members: You were more than 13 and a half years from your retirement age before 1 April 2012
• ‘New’ members: You joined the scheme on or after 1 April 2015.

How does the Teachers’ Pension Scheme work? 

A legal ruling judged that this method of calculating pensions discriminated against younger members of the teachers’ pensions scheme who joined more recently.

As a result, changes from 1 April 2022 mean all members will have their pensions moved to a career average scheme.

This means members will receive an amount based on pensionable earnings each year they are participants in the scheme.

Until 2015, teachers’ pensions were based on the final salary of members close to or at the time of retirement. The career average scheme bases the final salary of members on a career average of earnings during the period that members were enrolled in the scheme.

In practice, this means many people’s pensions might be lower than under the previous scheme.

As your final amount takes into account the salary you accrued over your career, from entry-level at the early part of your career to more senior roles later on, the average is likely to be dragged down.

In principle, this could mean that people choose to work for longer to make up for this difference.

While some teachers who have already accrued most of their pensions are approaching retirement may be in a decent position, if you’re a younger teacher, you may want to speak to a financial adviser to help you prepare for your retirement. 

How do teachers’ pension contributions work? 

Regardless of whether you are a full-time or part-time teacher, you will continue to make contributions to your pension in the same way.

Depending on your salary, you will make monthly contributions from your gross salary, which will be topped up by your employer.

For 2024/25, the member contribution thresholds are:

• Earnings up to £34,289.99: 7.4%
• Earnings between £34,290 and £46,158.99: 8.6%
• Earnings between £46,159 and £54,729.99: 9.6%
• Earnings between £54,730 and £72,534.99: 10.20%
• Earnings between £72,535 and £98,908.99: 11.3%
• Earnings over £98,909: 11.7%

For all of these bands, employers will make a flat contribution of 28.68%.

What is the average teacher’s pension in the UK? 

There is no average pension for teachers to retire with, as calculations are unique to the individual and when they enrolled on the pension scheme.

For example, a teacher who has been enrolled in the scheme for 30 years but never began earning a senior salary might have accrued a pension with a lower average or final salary than someone who has been enrolled for less time, but worked in more senior positions. 

Your pension will also be adjusted in line with inflation, ensuring that you get a real pension increase. Your pension is tied to the Consumer Price Index (CPI), which means that whatever the inflation rate comes to, as measured by the CPI, your pension will always increase or decrease by the exact same amount. 

Can you leave the teachers’ pension scheme?

Leaving the Teachers’ Pension Scheme or taking an extended leave from the profession could affect your final pension pot.

If you don’t want a teacher’s pension in the first instance, you are able to opt out of the scheme. When you start teaching, your employer is legally bound to automatically enrol you so you will need to consent to leaving.  

If you opt out and then decide to start making contribution again later, you can opt in again and continue making contributions. However, you should remember that changes in April may affect your final pension.  

While you can take a break and return to making contributions, leaving teaching altogether means that contributions will be stopped. You may be able to bring your existing pension to your future employment, otherwise you will be able to claim your teaching pension once you reach 60 or 65. 

What happens to your teacher’s pension if you die? 

The death benefits your next of kin receive from your teachers' pension depend on whether you’re on the final salary or career average scheme and your service status at the time of death.

If you die while in service, your next of kin will receive a death grant of three times your annual salary, regardless of whether you’re in the final salary or career average scheme.

If you die while collecting your pension:

• If your pension has been in payment for less than five years, a death grant equal to five times your annual pension, less any pension received, will be paid.
• Your partner or spouse will receive a full pension (final salary or career average) for three months, followed by a reduced ongoing pension.
• For final salary schemes, your partner receives 1/160th of your final average salary for each year of service. For career average schemes, they receive 37.5% of your pension

Eligible children may receive a child’s pension if they are under the age of one or up to the age of 23 if in full-time education or training. They also qualify if incapacitated and unable to earn a living due to ill health.

Get expert financial advice

Understanding the teachers' pension scheme and the changes in 2022 is crucial for managing your retirement planning effectively.

Following the shift to the career average scheme, it's essential to stay informed about how these adjustments impact your pension benefits, contributions, and entitlements.

Whether you are currently teaching, approaching retirement, or planning for your future, reviewing your options and seeking professional advice can help ensure you make the best decisions for a secure and comfortable retirement.

Let Unbiased match you with a financial adviser for expert financial advice to optimise your retirement planning.