How Do Teacher Pensions Work

Learn how the Teachers’ Pension Scheme works in the UK. Understand final salary and career average arrangements, and how your pension builds over time.

How Do Teacher Pensions Work?

The Teachers’ Pension Scheme is a key benefit for teachers in the UK. It provides a secure and reliable income in retirement that is protected against inflation. Whether you are just starting your career in education or approaching retirement, it is important to understand how the scheme works and what you can expect from it.

This article explains how teacher pensions are built up, how they are calculated, when you can take them, and how they are paid.

What is the Teachers’ Pension Scheme?

The Teachers’ Pension Scheme is a defined benefit pension, which means your pension is based on your salary and years of service, not investment performance. It is backed by the government and operates across England and Wales. Scotland and Northern Ireland have their own similar arrangements.

There are two main types of arrangements within the scheme:

  1. Final salary arrangement for service before 1 April 2015

  2. Career average arrangement for service from 1 April 2015 onwards

All new pension benefits are now built up under the career average revalued earnings (CARE) structure.

How do teacher pensions build up?

Final salary arrangement

This applies to service before April 2015 for teachers who were in the scheme before that date. Your pension is calculated as:

  • Years of service multiplied by a fraction of your final pensionable salary

  • Most commonly, the formula is service years divided by 80 multiplied by final salary

For example, if you had 20 years of final salary service and a final salary of £40,000:

  • 20 divided by 80 equals 0.25

  • 0.25 multiplied by £40,000 equals £10,000 per year

Some members may also qualify for an automatic tax-free lump sum.

Career average arrangement (CARE)

Since April 2015, teachers build pension benefits under the CARE scheme. Each year you earn a pension equal to one fifty-seventh of your pensionable salary for that year. This amount is increased every year in line with inflation.

For example, if your pensionable salary is £38,000 in a year:

  • £38,000 divided by 57 equals approximately £666 earned for that year

  • That amount is revalued and added to your pension pot each year

All annual amounts are added together to calculate your total pension at retirement.

When can teachers take their pension?

The normal pension age depends on the type of service:

  • If you have final salary benefits, your normal pension age is likely 60 or 65

  • If you have career average benefits, your normal pension age is linked to your State Pension age

You can take your pension from age 55, but it will be reduced if taken before your normal pension age. This is known as actuarial reduction.

Can teachers take part of their pension as a lump sum?

Yes. Teachers can usually take part of their pension as a tax-free lump sum when they retire.

  • Final salary members may have an automatic lump sum

  • CARE members can choose to exchange some annual pension income for a one-off payment

  • For every £1 of pension given up, you can receive £12 as a lump sum (subject to limits)

There is a maximum amount of tax-free cash you can take, currently set at 25 percent of your total pension value or a capped amount if you have protected rights.

Do teacher pensions rise with inflation?

Yes. Teacher pensions are protected against inflation.

  • While working, CARE pensions are revalued each year

  • After retirement, pensions are increased each April based on the Consumer Prices Index (CPI)

This helps ensure that the value of your pension keeps pace with the cost of living.

What happens if a teacher leaves the profession?

If you leave teaching but have at least two years of qualifying service, your pension is preserved. This means it will remain in the scheme and be revalued each year until you claim it at retirement.

You may also transfer your pension to another qualifying scheme, depending on the provider and time limits.

Can teachers take their pension and keep working?

Yes. Under phased retirement, you can:

  • Reduce your working hours or salary by at least 20 percent

  • Take up to 75 percent of your pension

  • Continue to build further pension benefits while working part time

This is a flexible way to move into retirement gradually while maintaining income and pension growth.

Final thoughts

Teacher pensions work by rewarding years of service and earnings with a secure, inflation-linked income in retirement. The scheme combines older final salary arrangements with modern career average features to ensure fairness and sustainability.

Your pension benefits depend on how long you teach, your salary, and when you retire. By understanding how the system works, you can make informed choices about your future and plan for a comfortable retirement.