This article focuses on the Career Average arrangement of the Teachers’ Pension. For most teachers, this is the scheme you are now paying into. The scheme changed in 2015, and some members are still within the Final Salary arrangement, and some are a mixture of both. This article focuses on how a Career Average arrangement gathers pensionable earnings.
What is 1/ 57th?
Every year you contribute to your pension through your salary, you will accumulate 1/ 57th of your pensionable earnings. This means that your pension will build up each year and form the basis of the amount you receive when you leave work. In short, the longer you work in teaching, the better your income when you finally retire.
Indexation?
Each year this pension amount will be revalued using a process called indexation. Each year the HMT (Her Majesty’s Treasury) publishes a rate that acknowledges the changes in the cost of living. This revaluing currently adds 1.6% to your pension each year. Indexation is likely to change year on year – as are your pensionable contributions. Your contributions will rise more each year at first because you will receive a pay rise for the experience you gain. Then, when you are promoted, you will be paid more; therefore, your pension contributions will be higher.
Getting accurate projections
Each year you will receive a pension statement, which is published on My Pension Online. This will give you an insight into what your pension is valued at in that year. If you want to start to think about your pension benefits and in projection the lifestyle you can enjoy on retirement, then you can use the calculator. This will help you estimate your final pension value.
The content in this article was correct on 10th February 2020. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.