Working as a retired teacher

There are a variety of ways of bringing your teaching career to an end and each has a financial outcome that you should be aware of and plan for.

Phased retirement
Get the best of both worlds by continuing to teach on a part-time basis and drawing a pension.  Things to bear in mind:

  • Your salary will need to be reduced by at least 25%
  • Any pension drawn is actuarially reduced
  • You can draw up to 75% of pension benefits

Find out by how much your pension will be actuarially reduced if you plan to take early retirement with the ARB/early retirement calculator

Return to teaching
If you retire after 60, access your pension and then decide to go back to teaching, your pension will be capped if your salary plus pension payments exceed what you were earning on your last salary, or ‘salary of reference’.

  • For example, Joan retires on her 60th birthday and draws a pension of £15,000 without any actuarial reduction.  Her previous salary of reference was £35,000. Her previous school asks her to return to them on a three day week basis on a pro rata salary of £21,000.  In this example, Joan’s actual income for the year will be £36,000; £1,000 over her salary of reference of £35,000 and her pension payments will be reduced (abated) by this amount.

If you retire before 60, but work as a teacher and draw your pension, your pension will also be actuarially reduced.  There is no limit to how much you can earn, but your pension amount will be less than you would draw at the age of 60. 

Find out how a return to teaching would affect your teachers’ pension Re-employment calculator

Working outside of the classroom
If you decide that you have had enough of the classroom and would like to try something different, the good news is that you can earn as much as you like and it won’t affect your teacher’s pension.

Whatever form of work you choose, you will definitely need to be aware of the government’s tax bands:

Tax allowances 2008/9

Age allowance (65-74)£9,030
Age allowance (75+)£9,180
Age allowance restricted£21,800

Tax bands 2008/9

10% of £2,320 savings income but only if only if other income is less than £2,320 

Source: “Money, tax and benefits”

The above figures are scheduled to change from 1st September 2008 to deal with the effects of the removal of the 10% tax band in April 2007.

With thanks to Stuart Gayer, independent financial adviser, BBT Group. For further independent financial advice visit an get a free copy of ‘The Pocket Guide to Surviving Retirement’ by calling 0845 345 0800 or download it for free The pocket guide to surviving retirement

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