When you first start teaching, your salary will not overwhelm you with funds. You may feel a little strapped. Consequently, you may be looking for ways to increase the cash flow, just in the short term, while you gain years of experience and a pay rise. You may wonder if there is any flexibility in the amount you pay towards your pension. Here we offer a guide to the amount you pay and your rights to opt-in and opt-out.
Contractual enrolment
When you start work as a teacher, you will receive a contract of employment. As part of the teachers’ contract, you will be enrolled in the Teachers’ Pension Scheme (TPS). Regardless of how much you earn, if you are between 16 and 75, you will become a member of the TPS. You will have money deducted from your salary and paid into this scheme. Your employer will also be making contributions on your behalf.
Auto-enrolment
In recent years, there has been a change in the law regarding workplace pensions. The government are aware of a looming crisis, as the population is ageing and soon people will need to care for themselves even more in old age. Therefore, the government requires all eligible workers, whether in the public or private sector, be enrolled in a pension scheme.
Making Payments
The benefit of the pension scheme being the responsibility of your employer is that it leaves your paycheque before you ever receive it. This deduction from your salary also means you get tax relief on your pension contributions.
It is also worth repeating that for every payment you make, your employer will pay into the scheme every month too.
Opting out
As you can tell, opting into the pension is easy. It will happen automatically. If you want to stay in the pension, you don’t need to do anything. There are a lot of benefits to being in the scheme beyond your comfort in retirement. You also receive ill-health cover, and your loved ones are protected should you pass away in service.
However, if you wish to opt-out, you can apply to the Teachers’ Pension Scheme website. If you are in your first year of teaching, you will need to make sure your employer receives your form within three months of contractual or auto-enrolment, if you hope to get a refund on contributions already paid.
You can opt-out after these three months, but you would remain as a deferred member until you resume contributions, leave teaching or transfer your pension to another scheme.
The content in this article was correct on 10th March 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.