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By Wesleyan

Spring budget 2023 - talking points for teachers

teachers pension
cost of living for teachers
4 min
Female teacher walking through classroom filled with students

On the day that thousands of teachers walked out on strike in protest over pay, the Chancellor unveiled a package of measures designed to help household budgets.

While there was little in the way of targeted support for teachers, there was more support to help tackle the cost of living and an overhaul of the pensions regime which should help headteachers work for longer.


The Chancellor set his sights on the tax-free allowances which had been frozen since 2020 and have been blamed for forcing higher-earning teachers out of the job.

The Annual Allowance – the amount of money that people can put into their pension every year without paying tax on it – was increased from £40,000 to £60,000.

And the big surprise was that the £1.07 million Lifetime Allowance would be abandoned altogether.

We’ve been calling for action on these allowances for some time now to help senior teachers and headteachers stay in work for longer, at a time when their services are so desperately needed.

Iain Stevenson, Head of Education at the Wesleyan Group, said: “Abolishing the lifetime allowance and significantly increasing the annual allowance is great news for many in education.

“It will particularly support senior teachers, head teachers and lecturers, by reducing the threat of facing extra tax charges for continuing to work and save into their pensions.

“Pension tax problems are something we’ve been highlighting for some time now, and so we’re pleased to see the government take action.”

We also welcome an increase to the Money Purchase Annual Allowance – which allows teachers who’ve already accessed some of their personal pension to top it back up again – which went up from £4,000, back to its original level of £10,000.

This was a disincentive for many who wanted to return to the classroom because it was a barrier to rebuilding their retirement savings, so today’s announcement will allow them to work more flexibly, supporting retention and helping address workforce shortages.

The Chancellor also announced that the Pension Commencement Lump Sum that pension members can take out tax free when they retire - is now limited to a fixed £268,275, rather than the current 25% of Lifetime Allowance, and will be frozen going forward.

Cost of living

A big reform of childcare policy announced today is designed to help boost the economy by encouraging more parents back to work while alleviating pressures on household budgets, with the average annual cost of a full-time nursery place now nearly £15,000.

Three and four-year-olds are already entitled to at least 15 hours of free childcare per week for 38 weeks of the year, increasing to 30 hours a week if their parents are working.

This has now been extended to children aged nine months to three years, though a lack of capacity in nurseries means it will take two years to roll out in full.

And a planned £500 hike in average energy bills that was due to arrive in March has been abandoned, with the Chancellor acknowledging: “High energy bills are one of the biggest worries for families.”

Instead, as expected the Energy Price Guarantee will remain at £2,500 for a typical household in England, Wales and Scotland until the end of June.

And we can expect more good news as wholesale gas prices are now in decline and bills are forecast to fall further later in the year.

Finally, a 5p per litre cut to Fuel Duty, which was imposed in the Budget in in March last year, was due to come to an end in March, but was extended for another year.

Iain Stevenson said: “While we heard limited measures to reduce the current pressures that are squeezing teachers’ personal finances, rising costs are making it difficult for many to save day-to-day or put money aside for retirement. 

“For those teachers who can afford to keep saving, it’s imperative that they make their money work as hard as possible.

“This includes making the most of ISA allowances to keep their investment growth or interest payments tax-free.” 

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