What is phased retirement?
If you’re looking to slow down your schedule but you’re not quite ready to stop working, you can opt for a phased retirement under the Teachers’ Pension Scheme (TPS).
Taking a phased retirement will allow you to access part of your pension while you’re still teaching. You’ll be able to take up to 75% of your benefits from the age of 55, as long as you reduce your pensionable earnings (in other words, your annual salary) by at least 20%.
You can do this by:
- Reducing your teaching hours
- Moving into a role with less responsibility
As you’ll still be teaching, you will continue to make pension contributions and build your benefits ready for when you retire (based on your reduced hours).
If you choose to take phased retirement before your normal pension age (the age at which you can get your pension in full), you may face reductions. If you take your benefits after your normal pension age, you won’t.
Your normal pension age (NPA) will depend on which scheme your benefits are in, but is usually between the age of 60 and 68. You can find out more about your NPA and when you can retire on the TPS website.
How does phased retirement work?
To be eligible for phased retirement under the TPS, you must be between the age of 55 and 75. Unlike other types of retirement in the scheme, you won’t need to take a break in employment. This means that you can start your new contract as soon as it’s agreed with your employer.
You can apply for phased retirement by downloading and completing the relevant form on the TPS website. Your application must be received by the TPS within three months of reducing your working hours or starting your new job role.
As mentioned earlier, your annual salary must be reduced by at least 20% in comparison to your previous twelve months averaged earnings. If you’ve left employment, you can still apply for phased retirement as long as you do so within six months of leaving.
Once your phased retirement has started, you will need to keep your new arrangement in place for at least 12 months. If you decide to return to full-time teaching (or teaching hours that exceed the 20% reduction) following these 12 months, you can do so as long as your school agrees.
The amount of phased retirements you can take will depend on which section of the scheme your benefits are in:
- Final salary – If your benefits are in the final salary section of the scheme, you can take two phased retirements before you fully retire. To estimate your adjusted pension benefits, see the final salary phased retirement calculator on the TPS website.
- Career average – If you’re a career average member of the scheme, you can take three phased retirements before you fully retire. However, only two can be taken before the age of 60.
- Benefits in both final salary and career average – If you have benefits in more than one section of the scheme, you can take different proportions of your benefits from both sections.
Bear in mind that retirement benefits aren’t paid automatically, so when you’re ready to retire fully, you will need to apply for your final pension through the TPS. This will be through either normal age retirement or early retirement.
You can find out more about collecting your pension in our guide to the Teachers’ Pension Scheme.
Is phased retirement a good idea for teachers?
Retiring from work is a big life transition, and you may not be ready to give up teaching completely. Choosing to take a phased retirement can help you to ease into this stage of life, but there are a number of things to consider before making a decision.
Phased retirement pros and cons
There are a number of benefits associated with phased retirement for teachers, including:
- Being able to retire at your own pace
- Getting used to a different work-life balance before giving up work entirely
- Taking on less responsibility later in your career
- Continuing to build your pension pot while you're still teaching
However, there are other factors to keep in mind:
- You’ll need to discuss your phased retirement plans with your current employer to make sure there’s an appropriate position for you. If they’re unable to accommodate a phased arrangement, you will need to find a new role with a different employer that is also in the Teachers’ Pension Scheme.
- As mentioned earlier, if you choose to take your benefits before your normal pension age, you may face reductions.
- It’s also important to be aware that if your salary exceeds the 20% reduction during your phased retirement (for example, by working as a substitute teacher), your application will be rejected and your benefits may be suspended.
How does phased retirement affect my death in service benefits?
When you take phased retirement under the TPS, you become what is known as a dual capacity member. This is because you’re both a pensioner member and active member at the same time. As a dual capacity member, the death in service benefits available to your beneficiaries if you were to die will be impacted.
If you remain in service (you’re still working), or you’ve left teaching and have deferred benefits in the scheme, a death grant may still be paid to your beneficiaries. However, any retirement lump sum you were paid at the point you took phased retirement would be deducted from the value of your death grant.
If you die within five years of taking phased retirement, a further death grant may be available to your beneficiaries. This supplementary grant is five times the rate of your pension when you pass away, minus the amount of pension you had received before you died.
To find out more about what happens to your teachers’ pension when you die, read our comprehensive guide.