Teacher pensions – Why I lost £70k from mine (and what to do)
Getting to know the rules around teacher pensions can help you protect your pension against below-inflation pay rises…
- by David Fountain
- Teacher with almost 30 years of experience Visit website
I have lost £70,000 from my teacher pension. No, it wasn’t down to Trump, and it wasn’t down to May. It most certainly wasn’t down to risky investments or any banking crisis.
In fact, I have lost £70k from one of the best and most secure pensions available in the UK – the Teachers’ Pension Scheme.
The bad news is that I am not alone. Take a look around your staffroom. Anyone who has been in the same post for eight or more years has probably lost a similar amount, or even more if they have longer service at the same pay scale.
Are you joking?
The problem was that I fell for the lie that so long as my pay kept going up and I kept paying in to the scheme, then my pension must get better. That is almost true.
But it is in that gap left by the ‘almost’ that I have lost out so badly. If my pay had kept going up by more than inflation, then that is when the lie would have been true.
“My pension is down over 10 per cent from what it might have been”
But as we know, teachers’ pay has been in decline compared to inflation for decades. A UPS3 salary outside of London is, at the time of writing in 2024/25, £49,084.
Back in 2005/6 it was only £32,628. But if you were to increase that in line with inflation, it would, in April 2025, be equivalent to £56,153. That is 14.4 per cent higher than the actual current pay.
Would I have liked my teacher pension to be 14.4 per cent higher than it is now? Of course I would. So, why isn’t it?
The ‘final salary’ pension is based on, unsurprisingly, the salaries at the end of your career and not the salaries you were on 20 years, or more, ago.
The TPS does have some protection against this below-inflation pay decline. It does get to use salaries from the past 10 years. But even so, my pension is down over 10 per cent from what it might have been.
Pensions in numbers
- 23.68% – the employer contribution to a Teacher’s Pension Scheme (TPS) pot.
- 7.4% – the starting employee contribution to a TPS pot.
- This rises to a maximum of 11.7%, depending on your earnings. You can also make voluntary additional contributions to the pot.
- 1/57th – the amount teachers will add to a TPS pension pot, depending on the amount of earnings each year. See the index figures.
- 2015 – the year the government introduced reforms to public service pension schemes, including the Teachers’ Pension Scheme. This meant some members receiving Transitional Protection remained in the final salary scheme, while others entered the career average scheme. These changes have since been deemed discriminatory on age grounds. Speak to your financial adviser or pension rep to see how this affects you.
Learn the rules
But it’s not too late to do something to stop the rot – and you may even have already done it without realising.
In England and Wales there is a rule that when you take a break from the pension scheme, your salaries in the years leading up to that break can be used forever in the calculation of your pension (in Scotland and Northern Ireland you need a break from employment).
“It’s not too late to do something to stop the rot”
Not only can they be used, but inflation is then added from the date of the break – and so the pension gets full protection against below-inflation pay rises.
Had I done this back when I became a head of year for the first time, my pension now would be 10 per cent higher, and that would mean £7,500 more in my tax-free lump sum and an extra £2,500 a year on my pension.
Assuming I take my pension at 60, and live to an average age, that would have seen me gain £70,000 over what I can expect now. The rule is known as the ‘hypothetical calculation’.
I am not alone, and I have most certainly not lost as much as many others. I have seen ex-heads who have stepped back into the classroom after years in the top job getting their pensions slashed because they didn’t have a break to protect their final salary pension.
This includes one head whose final salary has dropped from the equivalent of £74,000 to £50,000.
If they had taken a break from the pension scheme at the right time, then their pension would be around 50 per cent higher than it is going to be as a result.
Their lump sum has dropped from £79k to £53k and they will be getting a pension that is £8,500 less a year as well.
Angry losers
As a head of year, I was often involved with angry young people; I have no problem with anger – only with what it leads to.
If it leads to something destructive, I have no tolerance for that – anger when you see something that is wrong is fine, but you have to do something constructive with that energy.
So, yes, I got angry at losing out; but I also realised that I could do something positive. That’s why I have put years into learning about the rules of the scheme and how they can trip the unwary, but also how they can help maximise the benefits.
“I got angry at losing out; but I also realised that I could do something positive”
Getting to know the rules can help you determine the best course of action, but remember to check with your financial adviser before making any changes – the ideas in this article would work for me, but it’s always best to be sure!
David Fountain is a teacher with almost 30 years of experience. Join the Teacher Pensions – Teacher to Teacher (UK) Facebook group. Always check with your financial adviser before making any changes to your pension. This column is meant as a summary only, and is not intended as professional financial advice or information. All numbers are correct at the time of writing in July 2025.
