What is abatement?
Abatement, sometimes known as the age restricted allowance, is a financial restriction placed on members of the Teachers’ Pension Scheme (TPS) who choose to work beyond their normal pension age (NPA) while drawing their pension.
Under the abatement rule, your combined income from your pension and regular work salary cannot exceed the ‘salary of reference’ noted in your pension statement. If it does, your pension will be reduced to bring it in line with your salary of reference.
Who does it apply to?
In the TPS, abatement will only apply if you keep working in education after your NPA, without a break.
If you are part of a final salary scheme, your NPA will be 60 years old. So, if you want to continue teaching past this age, the abatement rule will apply.
The abatement rule does not apply if you continue to work past your NPA in another career or discipline. So, if you wanted to retire at 60 and work in a coffee shop, the abatement rule would not apply.
Can I continue working as a teacher and not lose out on my pension?
Yes, you can, but you’ll need to ensure that your combined salary and pension income does not exceed your salary of reference.
This might be achieved by taking phased retirement whereby you can access up to 75% of your pension while working, so long as you reduce your salary by at least 20% for at least a full calendar year. You can choose to take this from either the 80th final salary part of your pension or the Career Average (CARE) element of the scheme or a combination of the two.
The salary reduction could be from reducing your working hours or taking a slightly lower paying position. The bonus here being that you get to ease into retirement at your own pace, without having to change the existing terms and conditions of your contract.
Your school will need to give their permission for you to alter your hours or position. It’s preferable to get this agreed in writing well in advance of turning 60. Particularly if they will need to find another teacher to take up your position or make up the difference in hours.
If you want to explore this option, it’s important to ensure that your school is still enrolling new teaching hires into the TPS to allow you to re-join the scheme. You’ll also lose access to your death in service grant while you’re opted out of the scheme.
How do I know if I’m impacted?
You will only be impacted by the abatement rule if you are a member of the final salary scheme.
Following the outcome of the McCloud judgement in 2018, most teachers will find that they are a member of both the final salary and CARE scheme. If you choose to retire before 60 or retire and return, you will have to take both parts of your pension.
You’ll be able to find further details about the schemes you are part of in your latest TPS statement. It should also detail the amount of pension benefits you hold in each part, along with your NPA for each scheme and your salary of reference.
Can I continue contributing to the TPS after 60?
If your plan is to reduce your hours or take a less senior position to reduce your pay in line with your salary of reference, then yes. You will continue contributing to the CARE scheme which is the part of the scheme that new TPS members are enrolled in today.
You will continue contributing to the TPS even if you choose not to take your pension at 60 and lower your wage to bring it in line with your salary of reference. However, there is generally no financial benefit in doing this if you are a final salary scheme member.
If your school is no longer enrolling new teaching hires into the TPS, it may be worth meeting with a Specialist Financial Adviser from Wesleyan Financial Services to discuss your options.