TPS: Final salary scheme

When can I get my pension rights in full?

Your Normal Pension Age (NPA) is the age at which you can take your pension rights in full. Your NPA depends on when you joined the scheme. If you joined the scheme on or after 1 January 2007, you have an NPA of 65. If you joined the scheme before 1 January 2007, you continue to have an NPA of 60 provided that you do not leave teaching for more than five years.

However, if you return to teaching after more than a five-year break, you'll have what's known as 'Mixed Service'.

Calculating your pension –

What salary is my pension based on?

The term ‘average salary’ describes the salary figure prior to retirement (not your salary when you left the final salary scheme) on which your pension is based. It is calculated as the better of the following two options

• Salary in the last year before retirement.
• The average of the best three consecutive years in the last ten years. This is revalued with CPI inflation, so in effect it’s the highest relative period in your earnings.

Deferred members prior to 1 January 2007 who never return to teaching will have their pensions calculated on the pre-1 January 2007 basis (best year in last three years).

How does your pension build up work if your NPA is 60?

The pension is 1/80 of average salary for each year of reckonable service. You also get an automatic tax free lump sum of three times your pension.

Example:

If average salary = £30,000 and member has 20 years’ reckonable service then the pension will be:

£30,000 * 20/80 = £7,500 a year + £22,500 tax-free lump sum.

How does your pension build up work if your NPA is 65?

The pension is 1/60 of average salary for each year of reckonable service. There is no automatic tax-free lump sum.

Example:

If average salary = £30,000 and member has 20 years’ reckonable service then the pension will be:

£30,000 * 20/60 = £10,000 a year.

Can I take an additional tax free lump sum?

If you have service on or after 1 January 2007, you can take up to 25 per cent of the total value of your pension rights as tax-free tax free lump sum – exchanging each £1 of annual pension for £12 of lump sum.

How can I work out my pension and lump sum?

There is a calculator available on the Teachers’ Pensions website. Before using the calculator, find your last benefit statement from Teachers’ Pensions or, if registered, log into their MyPensionOnline service to find your amount on reckonable service and your average salary figure. The calculator also works out the maximum tax-free lump sum that you can take.

Calculating your pension –

What happens if I worked part time?

For working out your benefits, only the days you worked count towards your pension. So, if you worked at 0.5 for two years, this counts as one year of ‘reckonable service’. Your ‘average salary’ will be the FTE salary rate for the job.

How is my pension increased in retirement?

Your teachers’ pension is increased each April based on the previous September’s inflation figure. The Government currently uses the Consumer Prices Index (CPI) to work out increases.

Split pensions –

Final salary and career average rights

From 2022 (or 2015 depending on their choice), all teachers who have been in the TPS since before 2015 will have a split pension record. Part of their pension will be from the new career average scheme and part will be from their final salary scheme.

The final salary pension will be based on the teacher's salary when they leave teaching (or the period leading up to it), not their salary in 2022.

Teachers can in theory take their final salary pension in full at their scheme pension age (either 60 or 65). This is easier said than done because they will have to end their contract to get it (or opt out of the scheme).

There is also the question of whether teachers have to take their career average pension when they take their final salary pension.

If teachers take their final salary pension at or beyond their final salary scheme pension age, they can take the two parts separately. If they take their final salary pension before their FS scheme pension age, they must take their career average pension rights as well. This would mean a large actuarial reduction in most cases.

What if I want to retire early?

Actuarially reduced benefits allow you to take your pension before your Normal Pension Age. To be able to claim, you must be 55 or over and have service in the Teachers’ Pension Scheme on or after 30 March 2000. Your pension (and any associated lump sum) will be reduced because you’re retiring early and can expect to get it for a greater number of years. The earlier you take the pension, the bigger the reduction.

If you retired when still in the final salary scheme and deferred your pension, the early retirement rules of the final salary scheme apply. There are different tables depending on whether your NPA is 60 or 65. Members who have been moved to the career average scheme are now under the rules of that scheme.

An ‘early retirement’ calculator is available on the Teachers’ Pension Scheme website.

Can I retire early through ill health?

If you are under NPA and had to stop teaching through ill-health, you can apply for an ill-health pension.

Ill-health pensions can be paid at two levels:

• Total Incapacity Benefit (TIB) for those permanently unable to teach and unable to undertake any other gainful employment.
• Partial Incapacity Benefit (PIB) for those permanently unable to teach but able to do other non-teaching work.

For members of the final salary scheme with service on or after April 2022, decisions on ill health retirement are made on the career average scheme rules.

Applications count as in service if:

1. made within two years of leaving pensionable employment (i.e. receiving at least half pay) or 
2. Person still has employment contract with employer and is under non-pensionable sick or family leave – so it is still possible under b) (if very unlikely) to make an in-service application to apply under Final Salary Scheme rules

If the application is not in service, then the applicant has to meet the TIB criteria in order to get the lower level PIB award, which is payment of accrued pension benefits unreduced for early payment.

The decision to award an ill-health pension is based on medical evidence. Before you even think about applying for ill health retirement, you should contact your NEU Representative / District Secretary.

What is ‘Phased retirement’?

Phased retirement allows teachers to keep working but in a reduced capacity – perhaps by moving to part-time work or a less strenuous post, but mitigating the income loss by drawing part of their pension.

To claim phased retirement, you must be aged between 55 and 75 and have service in the Teachers’ Pension Scheme after 31 December 2006. To qualify, you must reduce your pensionable salary by 20 per cent or more for at least 12 months. The reduction in salary is compared to your average salary over the previous 6 months.

You can draw up to 75 per cent of your pension benefits and carry on working. Members can only make two phased withdrawals from final salary benefits, compared to three from career average benefits. Members can take different proportions of different parts of their pension (i.e. 75 per cent from final salary and 0 per cent from career average in a phase).

What about my dependents?

For those who die in service or after retirement, survivors’ pensions may be payable to their beneficiaries. Different rules apply to the different schemes, dependents’ benefits accrued under the final salary scheme will be paid under final salary rules, while benefits under the career average scheme have different rules.

Eligibility for survivors' pensions from final salary benefits requires two or more years of eligible service. Currently, service from 1 April 1972 (all widows, widowers and civil partners) or 1 January 2007 (nominated unmarried partners) automatically counts for survivors' benefits. Unmarried partners must have been in a relationship for two years and be 'financially interdependent' at time of death. Children's pensions can also be payable depending on the age of the children.

Spouse, civil partner and nominated partners’ pensions are paid for life for retirements from 1 January 2007 (for people with service on or after this date) – rather than ceasing on remarriage or cohabitation.

Further guidance

More information is available from the Teachers’ Pension Scheme website.

You can telephone Teachers’ Pensions on 0345 6066166 or write to Teachers’ Pensions, Lingfield Point, Darlington, DL1 1AX.