Teacher's Pension - Understanding the TPS

Everything to get you started learning about the Teacher’s Pension Scheme (TPS) and its importance in financial planning for teachers.

Contents:

What is the Teachers' Pension Scheme?

Why is the Teachers' Pension Scheme so valuable?

How does the Teachers' Pension Scheme work?

Who can join?

Can I opt out?

How much do teachers contribute?

What type of pension is it?

Career Average vs Final Salary

When can I retire?

Is the pension guaranteed?

What happens if I leave teaching?

What happens if I die?

Is the Teachers' Pension Scheme worth it?

Frequently Asked Questions

Disclaimer

What is the Teachers' Pension Scheme?

The Teachers' Pension Scheme (TPS) is the workspace pension available to eligible teachers in England and Wales. It plays a crucial role in financial planning for teachers who are looking to secure their retirement.

It is a defined benefit pension, meaning your retirement income is based on scheme rules rather than stock market performance. Unlike a personal pension where you accumulate a pot of money, the Teachers' Pension Scheme provides a guaranteed income for life from retirement, along with valuable benefits such as survivor pensions and ill-health protection. For many teachers, it represents one of the most significant employment benefits they will ever receive.

Why is the Teachers' Pension Scheme so valuable?

The Teachers' Pension Scheme offers benefits that are increasingly rare in the private sector. These include:

Guaranteed income for life

Inflation protection

Employer contributions

Tax-efficient pension saving

Survivor benefits

Ill-health retirement protection

No investment decisions required

For many teachers, replacing these benefits privately could require a pension fund worth hundreds of thousands of pounds, making the TPS pension scheme a valuable asset.

How does the Teachers' Pension Scheme work?

Every month you contribute a percentage of your salary, between about 7-12% depending on your salary.

Your employer also contributes, currently 28% although this is meaningless as there is not pot of money, you build up guaranteed pension benefits, rather than a pot of money that is invested.

Unlike a defined contribution pension, your retirement income isn't directly linked to investment performance. Instead, the TPS pension scheme calculates your pension benefits according to your career earnings as a teacher.

Who can join?

You will usually be eligible if you are employed as a teacher by:

Local authority schools

Academies

Free schools

Many further education colleges

Some independent schools (if they participate)

Other eligible educational organizations

Not every independent school participates in the scheme, but many still provide access to the TPS.

Can I opt out?

Yes. Membership of the TPS is generally automatic if your employer participates in the scheme, but you can choose to opt out. However, opting out means relinquishing valuable benefits, including:

Employer pension contributions

Future pension accrual

Death benefits

Ill-health retirement cover

Given that the implications vary from person to person, it's crucial to understand the consequences before making this decision. For 99% of people they should not be opting out, it would mean losing a huge benefit. See my blog and guide on 'Should I opt out of the TPS?'.

How much do teachers contribute?

Teachers contribute a percentage of their pensionable salary, and the percentage is based on how much you earn. Higher earners pay a higher contribution rate, while your employer also makes significant contributions toward your pension. Refer to our Teacher Pension Contribution Rates Guide for the most up-to-date contribution bands.

What type of pension is it?

Since April 2015, most teachers build their pension under the Career Average Revalued Earnings (CARE) scheme. Teachers who accrued benefits before 2015 may also have portions in the older Final Salary scheme, resulting in many having benefits from both schemes:

Career Average: Based on earnings throughout your career, revalued each year under the current scheme.

Final Salary: Based on your salary near retirement, closed to new accrual for most members, but protected benefits remain.

We'll explain both schemes in detail in separate guides.

When can I retire?

Your normal pension age depends on which section of the TPS pension scheme you're in, when you joined, and your State Pension Age (for CARE benefits). You may also be able to:

Retire early

Take phased retirement

Retire due to ill-health

Continue working after drawing some pension benefits (subject to scheme rules)

Is the pension guaranteed?

One of the most significant advantages of the Teachers' Pension Scheme is that it provides a guaranteed pension under its rules. Unlike investments, the amount you receive isn't directly affected by stock market fluctuations. This stability makes it a valuable foundation for teachers' financial planning and retirement strategies.

What happens if I leave teaching?

If you leave pensionable employment before retirement:

Your existing benefits are normally preserved within the TPS pension scheme.

In most cases, these benefits continue to be revalued in line with scheme rules until you retire. Pensions are revalued each year at CPI plus 1.6% while in active employment, or just at CPI after a break in contributions of more than 5 years.

If you later return to eligible teaching, you may begin building up further benefits, depending on the scheme rules in force at that time, however existing entitlement only then increases at CPI, and you lose the extra 1.6% uplift on the existing pension.  The new pension you build up increases by CPI plus 1.6% again.

The exact outcome depends on various factors such as when you leave, how long you've been a member, and any future employment.

What happens if I die?

The Teachers' Pension Scheme includes vital protection for your family. Depending on your circumstances, this may include:

A lump-sum death grant.

A pension for an eligible spouse, civil partner, or qualifying partner.

Children's pensions where allowed by the scheme rules.

The benefits available depend on your membership status and individual circumstances.

Is the Teachers' Pension Scheme worth it?

For many teachers, the TPS represents one of the strongest workplace pension arrangements available in the UK. It combines:

Guaranteed retirement income.

Employer contributions.

Inflation protection.

Valuable family benefits.

Tax-efficient saving.

Whether the TPS is the right choice for you depends on your individual circumstances, but understanding everything the scheme offers is crucial before deciding to remain a member or opt out.

Frequently Asked Questions

Is the Teachers' Pension Scheme compulsory?

No. If you're eligible, you'll usually be enrolled automatically, but you can choose to opt out (but I wouldn’t without careful thought).

Can supply teachers join?

Many supply teachers can join if they are employed in pensionable service by a participating employer. Eligibility depends on the nature of the employment.

Can I transfer another pension into the Teachers' Pension Scheme?

Transfers may be possible in certain circumstances and are subject to scheme rules and time limits.

Can I continue working after taking my pension?

In some cases, yes. This depends on the type of retirement and the TPS scheme rules applicable to your benefits.

Is my Teachers' Pension taxable?

Pension income is generally taxable like other forms of retirement income, although the amount of tax you pay depends on your overall circumstances.

Related Guides

Teacher Pension Contribution Rates

Career Average (CARE) Pension Explained

Final Salary Benefits Explained

Early Retirement Guide

Phased Retirement Explained

Additional Pension Guide

McCloud Remedy Explained

Teacher Pension Calculators

Teachers' Pension FAQs

Disclaimer

The information on this page is provided for general educational purposes only and does not constitute regulated financial advice or a personal recommendation. Pension rules can change, and their application depends on your individual circumstances. For advice tailored to your situation, please seek professional financial advice.