Let’s be honest. Most teachers know they have a pension. Ask them how it actually works, though, and you might find them reaching for a pile of unmarked homework instead!
To make things a little easier, here are 10 things we think every teacher should know.
1. It’s not a pension pot
Unlike many workplace pensions, the Teachers’ Pension Scheme doesn’t build up an investment pot with your name on it.
Instead, it provides a guaranteed income for life when you retire.
2. Your employer contributes too
Your pension isn’t funded by your contributions alone.
Schools also make hefty contributions towards your pension, making it one of the most valuable parts of a teacher’s overall financial package. There’s a bit of a trope that ‘teacher pensions aren’t what they used to be’, but they’re still far more generous than most private sector pensions, and opting out to save on your contributions now would mean giving up an extremely valuable employer-funded benefit.
3. Every year you teach counts
Each year you teach adds to the pension you’ll receive in retirement.
Generally speaking, the longer you teach (and the more you earn), the more pension you’ll build up.
4. Promotion still pays off
Becoming Head of Department, Assistant Head or Headteacher can still increase the pension you build from that point onwards.
Unlike the old final salary scheme, though, promotions don’t suddenly increase everything you’ve already built up.
5. You won’t lose your pension if you leave teaching
Leaving teaching doesn’t mean losing the pension you’ve already earned. If you move to another career, your Teachers’ Pension simply stays there until you’re able to claim it.
6. But watch out for the two-year rule!
This isn’t the case, though, if you leave the profession with under two years of ‘pensionable service’. Then, you have three options:
- Leave the pension where it is – in case you ever return to the classroom, and it would pick back up where you left off.
- Transfer its value out into a different pension pot – which could be a pension from another job, or a DIY pension known as a SIPP.
- Receive a refund of your contributions – but this means you lose out on the contributions the school made.
7. You can have more than one pension
Many teachers also have:
- an old workplace pension,
- a personal pension, or
- eventually, the State Pension.
It’s perfectly normal to have more than one pension. You may also have the option to transfer a previous pension into your Teachers’ Pension when you first join (or re-join) the profession, but you have to do so within the first 12 months.
8. It’s designed to keep up with inflation
One of the biggest advantages of the Teachers’ Pension Scheme is that the pension you’ve built up is designed to increase over time, helping to protect its value against rising prices.
9. You can see how much you’ve built up
If you’re paying into the Teachers’ Pension Scheme, you can log in to My Pension Online to view your pension record and Benefit Statement, to see how much you’d be paid during retirement in today’s money. It’s well worth checking every so often to see how your pension is growing over time.
10. Understanding it is worth your while
Your pension is likely to be one of the most valuable financial benefits you’ll ever receive.
Spending just a few minutes understanding how it works could make retirement planning a whole lot easier.
The bottom line
The Teachers’ Pension Scheme has a reputation for being complicated, but once you understand the basics, it’s much less intimidating. Now you’re up to speed, we expect you’ll be the pension oracle in the staffroom!
