Teachers' Pension Scheme: Career Average, Accrual Rates, and Retirement Options

The Teachers' Pension Scheme (TPS) is one of the UK's principal public sector pension arrangements, covering state-sector teachers in England and Wales. Administered by Teachers' Pensions on behalf of the Department for Education, the scheme covers roughly 700,000 active members and over one million pensioners. This guide explains the current Career Average Revalued Earnings (CARE) structure, how benefits are accrued and revalued, and what teachers — including those now living or working abroad — need to know about their pension entitlements.

Historical Background and the 2015 Reforms

Before April 2015, the TPS operated on a final salary basis. The Final Salary arrangements provided:

• Pre-2007 entrants (legacy scheme): 1/80th accrual rate, Normal Pension Age (NPA) of 60, with an automatic lump sum of three times pension.
• 2007 entrants (reformed scheme): 1/60th accrual rate, NPA of 65, with commutation available but no automatic lump sum.

The 2015 reforms replaced these with the current CARE scheme for new benefit accrual, though legacy service is preserved and paid under the original rules.

The 2015 Career Average Scheme

Under the 2015 Scheme, each year of service adds 1/57th of your pensionable pay to your annual pension entitlement. So if your pensionable earnings in 2025–26 are £57,000, you accrue £1,000 of pension for that year. For earnings of £40,000, the accrual is approximately £702.

The pensionable pay definition includes:

• Basic salary paid under the school teachers' pay and conditions document
• Additional payments that are contractually pensionable under the scheme rules
• It excludes overtime, non-contractual bonuses, and certain allowances

Each year's accrual is then revalued annually in April by the change in the Consumer Prices Index (CPI), applied to all accumulated pension in the scheme. This protects the real value of benefits earned in earlier years during what may be a long career.

The Normal Pension Age under the 2015 Scheme is linked to the State Pension Age, currently 67 and legislated to rise to 68 (subject to review). Teachers may draw their pension before NPA, but an actuarial reduction applies. The scheme uses reduction factors published by the Government Actuary's Department.

Transitional Protection and the McCloud Remedy

When the 2015 reforms were introduced, transitional (or "tapered") protection was given to members within ten years of their Normal Pension Age as at 1 April 2012. This meant those members continued accruing benefits in the legacy final salary scheme rather than moving to CARE immediately.

Following the McCloud judicial ruling and the Public Service Pensions and Judicial Offices Act 2022, this transitional protection was found to constitute age discrimination. The remedy entitles eligible members to choose, at retirement, whether their service from 1 April 2015 to 31 March 2022 is calculated under the legacy or the 2015 Scheme rules — whichever is more beneficial. For teachers with significant pay progression, legacy final salary rules will often produce a higher pension for this "remedy period."

Teachers' Pensions has been updating Annual Benefit Statements to reflect the remedy and will present both options to affected members at the point of claiming their pension.

Salary Definition and Uplift

The TPS uses "pensionable pay" as defined in the Teachers' Pension Scheme Regulations. For most teachers, this is straightforward — their basic salary. However, pay uplifts arising from progression up the Main Pay Scale or Upper Pay Range, taking on TLR (Teaching and Learning Responsibility) allowances, or becoming subject-lead or headteacher can all affect accrual year on year.

For part-time teachers, pensionable pay is still calculated at the full-time equivalent rate, but the fraction of full-time service is recorded. This means a teacher working four days per week accrues pension based on their actual part-time salary (not the full-time equivalent), and the service fraction is tracked accordingly.

Ill-Health Retirement

The TPS provides two tiers of ill-health retirement:

• Tier 1 — if you are permanently incapacitated from teaching (not just your current post), you receive the pension you have accrued to date, paid immediately without actuarial reduction.
• Tier 2 — if you are incapacitated from all work (more severe test), you receive an enhancement to your accrued pension: your accrued pension is increased by 50% of the prospective pension you would have earned from the date of retirement to NPA.

Ill-health claims are assessed by Teachers' Pensions' medical advisers. Members are entitled to have their GP and consultant evidence submitted as part of the process, and decisions can be appealed.

Part-Time and Career Break Considerations

Part-time service is pensionable in the TPS, though benefits are earned on a proportionate basis. Teachers taking career breaks — including those moving abroad temporarily — cease to accrue new benefits during the break. Pension already accrued remains in the scheme, revalued by CPI, and becomes a deferred benefit if the teacher does not return.

Members on career breaks or sabbaticals do not pay TPS contributions and do not earn new pension during the break period. On return, pension accrual resumes in the current scheme (2015 Scheme for all active members from 1 April 2022).

It is important to note that career breaks, maternity leave, paternity leave, adoption leave, and sick leave on full pay are all treated differently for pensionable service purposes. Members should consult their employer or Teachers' Pensions to confirm the impact on their benefit accrual.

Contributions

Employee contributions to the TPS are tiered by pensionable pay, as follows for 2025–26 (indicative; confirm with Teachers' Pensions):

Pensionable Pay	Employee Rate
Up to £32,135	7.4%
£32,136 – £43,259	8.6%
£43,260 – £51,292	9.7%
£51,293 – £67,559	10.2%
£67,560 – £90,000	11.3%
Over £90,000	11.7%

Employer contributions currently stand at 28.68% of pensionable pay — a rate that reflects the actuarially assessed cost of the scheme and is a significant element of a teacher's total remuneration package. Contributions attract tax relief at source through payroll.

Refund of Contributions

If a teacher leaves the scheme within two years, they may claim a refund of their employee contributions. This is taxed at 20% on the first £20,000 and 50% on any excess. Employer contributions are not refunded.

For members with two or more years of service, a refund is not available — the pension is preserved as a deferred benefit in the scheme. Before electing for a refund on short service, it is worth considering the long-term value of even a small deferred TPS pension, which will be revalued by CPI and paid with a generous employer-funded pension at NPA.

Transfer Out Options

Deferred members can request a Cash Equivalent Transfer Value (CETV) and transfer their TPS benefits to another UK-registered pension scheme. Regulated financial advice is legally required before transferring a defined benefit pension worth £30,000 or more. In almost all cases, the guaranteed, inflation-linked income stream provided by the TPS will be superior to what can be replicated in a defined contribution arrangement, and most advisers will recommend retaining TPS benefits.

However, there are limited circumstances — particularly for teachers emigrating permanently — where a transfer might warrant careful consideration. The TPS cannot be transferred to a QROPS, as it is a public service pension scheme, meaning international transfer options are constrained to UK-registered schemes.

Retirement Income and Tax Treatment

TPS pensions are paid monthly by Teachers' Pensions. Benefits from legacy final salary service and from the 2015 Scheme are normally paid together at the same time, though the rules allow them to be treated separately in some circumstances. Pensions are subject to UK income tax under PAYE and are increased each April in line with the Pensions Increase (Review) Order, currently linked to CPI.

Members retiring abroad should be aware that UK government pensions — including TPS — are typically taxed in the UK under most Double Taxation Agreements. This means you may continue to pay UK income tax on your TPS income even if resident abroad. The relevant DTA and your country of residence's rules will determine the precise treatment, and professional advice covering both jurisdictions is important.

Compliance note: This guide reflects TPS rules as at June 2026. Contribution tiers, NPA, and revaluation rates are subject to change by HM Treasury. The McCloud remedy is being implemented progressively and some administrative details remain subject to further guidance. This guide is for information only and does not constitute regulated financial advice. Decisions about transferring a defined benefit pension should only be made following regulated financial advice from an FCA-authorised specialist.

How Global Investments Can Help

Whether you are a serving teacher planning your retirement, a deferred member working abroad, or a teacher approaching retirement who wants to understand the interaction between TPS benefits, the State Pension, and any private pension savings, Global Investments can provide expert guidance.

Our advisers are familiar with the TPS structure, the McCloud remedy, and the complexities facing teachers who have spent time abroad or who are now resident in another country. We can model your projected retirement income across different scenarios, assess whether additional voluntary savings make sense alongside your TPS entitlement, and help you plan the tax-efficient decumulation of all your retirement assets. Contact us for a no-obligation consultation.