Linda Wallace, Director of Wesleyan Financial Services, shares her top tips for teachers looking to take a career break or reduce their working hours.
After two incredibly challenging years, many in the teaching profession are reassessing their relationship with work. Our research uncovered that as many as four in ten teachers (38%) plan to change their working hours in the next two years, and of course many will have more long-term plans to scale back or even retire.
For those considering making a change, here are three things to consider.
Plan for a temporary or permanent change
The first thing to think about is whether this is a short-term change or a longer-term career move. Our research found that many female teachers were eager to reduce their working hours (29%) or take parental leave (11%), which requires different financial planning than more permanent changes such as retirement.
For those planning a short-term break, it might be the case that savings can cover any loss of income, or any shortfall is covered by a new temporary job. For some dipping into a rainy-day fund is an option here, but making sure there is still at least three months’ income set aside for emergencies is important.
If the decision is to leave the profession altogether, which around one in ten (8%) were aiming for, then bigger financial considerations are at play, as this could impact pensions and retirement savings more significantly.
Think about the pension packet
Simply, if you reduce paid time in teaching, the school will change what they are putting into your pension pot. This could mean changes in how much you expect to receive at retirement.
A good place to start understanding what these changes could mean is by looking at your pension savings and accrual. Many teachers are part of the Teachers’ Pension Scheme (TPS) and can look at their annual statements to understand how much they’ve got set aside, and what the annual contributions are.
Once you know what is being set aside, you can calculate how any changes in income could reduce what is being put into the pot. It’s important to remember that while short term changes may look small – especially in terms of monthly pension contributions – these grow over the longer term and could have a magnified impact when it comes to final pension values. For those leaving the profession, establishing what contribution rates you’ll get elsewhere will be important as often they are less generous than the TPS.
Make your money work even harder
Regardless of what changes you are planning, making sure your savings are working as hard as possible is a good step for strong financial health.
Many teachers keep their savings in standard savings accounts where it will accrue low levels of interest. Opting instead to save in the market, for example through a stocks and shares ISA, could help to grow savings at a faster rate, and critically outpace the rate of inflation which erodes the spending power of money over time.
Keep in mind that investment values are not guaranteed, and can go down as well as up. You could get back less than you invest.
Whatever the motivation for stepping back from the classroom it’s important to make sure that your wellbeing and financial health are carefully balanced to ensure you can have the future you dream of.
To find out more about how to manage your finances, you can speak to a Specialist Financial Adviser from Wesleyan Financial Services as part of a no obligation financial review.
Findings are based on consumer research of teachers in the UK, conducted by TeacherTapp between the 28th January and 1st of February 2022. The average number of respondents across the three questions asked was 4,849.