There are few pension schemes as generous and secure as the Teachers’ Pension. By paying into the scheme, you are securing your future and offering protection to your family. Though it is good to know that this scheme exists, you are also likely concerned about how much will be taken from your salary as contributions. Here we offer a basic insight into what you will pay.
How are your contributions calculated?
Your contributions are calculated using the amount you earn each month. Therefore, if you earn more in one month because of additional hours of work undertaken, you may pay more into your pension the following month.
Your benefits accrue each year based on 1/57th of your pensionable earnings, including any overtime you might work. Each year of pensionable earnings is “banked”, and the figure automatically increases year on year. If you stay in service, the amount increases more than if you leave the profession.
What are the pension contribution bands?
Each year the Scheme releases a table that shows the percentage contribution expected at certain pay levels. From April 1st, 2022, the contribution for those earning up to £29,187.99 is 7.4%. As a new teacher beginning your career, this is likely the figure representing your contribution to your pension.
What is faster accrual?
While there are many ways of contributing more to your pension, you must know about Faster Accrual now. You can make an “election” for Faster Accrual within one month of being in pensionable service. By asking for Faster Accrual, you can make a higher contribution of 1/45th, 1/50th or 1/55th. This is a long-term commitment and something that is best done after seeking independent financial advice.
It is important to remember that the Teachers’ Pension Scheme cannot give you advice. Therefore, if you want to understand the scheme’s implications for your circumstances, you might want to take professional financial advice. Any commitment you make with your pension can have tax implications.
The content in this article was correct on 28/07/2022.
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.