What is the average teacher's pension in the UK?
By
07 September 2023
Key Points:
- A new teacher joining the scheme today and working for a full 47 years would expect to receive a pension worth £27,000 and a lump sum of £180,000 (valued in today's money)
- The teacher's pension scheme is defined benefit and inflation-indexed
- Benefits are available to draw from a normal pension age of 66, or prior with early retirement
Pensions: the unspoken hero of teacher's compensation
Much time is spent in the UK news talking about the dire state of teacher pay (and rightfully so, teachers are paid less in the UK than in the majority of other OECD countries!) However, comparatively very little attention is spent on the teacher's pension scheme. This is a shame, as the pension scheme is one of the best financial benefits available to teachers today.
By using our teacher's pension calculator, MoneyMarvel can reveal that a teacher starting their career today and retiring in 47 years time would expect to receive an annual pension of £68,537 plus a tax-free lump sum of £457,000. In today's money that would be equivalent to an annual income of around £27k and a lump sum of £180k. Compared to pensions offered by many private sector employers this is really very generous, and should set up most teachers for a happy and fulfilling retirement.
Of course, this number is only an average and makes some assumptions about where you'll be working and your future salary growth. Try out our calculator if you'd like to see your own personal estimate.
Teachers that are further into their career are likely to receive even better pensions; especially those who started teaching before 2015. That's because they will be members of the even more generous final salary pension scheme that is no longer available to new teachers joining the profession today.
Why is the teacher's pension scheme so generous?
The teacher's pension scheme is a type of 'defined benefit' pension scheme. That means it offers a guaranteed income in retirement based on your contributions to the scheme whilst you were working. Depending on when you joined the scheme your guaranteed pension may be calculated either from your final salary in your last year of teaching or from your average salary over all the years you've worked. The 'defined benefit' has the big advantage that your eventual pension payment does not depend at all on how the pension scheme performs; you can forget all about tracking the health of the UK stock market or other volatile investments.
This is a significant difference from the pensions offered by most private companies in the UK, which are typically 'defined contribution' pensions schemes. These schemes offer a set contribution for each year that you work, but the eventual pension payments are entirely dependent on how the investments that the scheme selects performs. If the underlying investments (typically stocks and shares) don't do so well then the pension payout will suffer as well. Defined contributions schemes are usually more volatile and less generous than defined contribution schemes.
The other significant advantage of the teacher's pension scheme is that it is inflation-linked. Your defined benefit is linked to an inflation index (CPI + 1.6%) and will therefore increase as the cost of living goes up. This means that you also don't need to worry about inflation - the value of your pension is protected.
How much would I contribute to the teacher's pension scheme?
New joiners to the pension scheme today would join the 'Career Average' pension scheme. The contribution rates for this scheme in 2023 are as follows:
| Annual Salary Rate | You contribute | Your employer contributes |
| £0 - £32,135.99 | 7.4% | 23.68% |
| £32,136 to £43,259.99 | 8.6% | 23.68% |
| £43,260 to £51,292.99 | 9.6% | 23.68% |
| £51,293 to £67,979.99 | 10.2% | 23.68% |
| £67,980 to £92,697.99 | 11.3% | 23.68% |
| £92,698 and above | 11.7% | 23.68% |
A new teacher joining today with a starting salary of £30,000 would pay £2,220 in pension contributions. Whilst this is clearly a significant contribution, it represents great value for money: our teacher's pension calculator demonstrates that you'll eventually get over £9,000 in value for the £2,200 initial investment.
MoneyMarvel's advice is to take full advantage of the pension scheme if you're at all able to, otherwise you'll be leaving free money on the table in the long run.
When can I collect the pension?
New teacher's starting today would usually expect to draw their pension from what is called the Normal Pensionable Age (NPA). This is typically the same as the state pension age - currently 66 for both men and women but expected to rise to 67.
However, the teacher's pension does also allow for early retirement if you choose to finish work sooner. Those electing to go down this route can draw their pension as long as they are above the 'minimum pension age' - which is currently age 55 (but will increase to age 57 from April 2028). Note that if you do elect to draw your pension earlier than the Normal Pensionable Age then the benefits will be adjusted down to reflect the fact that you're drawing them earlier and for a longer period of time. You'll receive less pension each year than you otherwise would have, so make sure that it's the right choice for you.
