Teachers' Pension Scheme (TPS) Explained 2026 — Contributions, Benefits and Opting Out

The Teachers' Pension Scheme (TPS) is one of the most valuable workplace benefits in the public sector, yet many teachers have only a vague grasp of how it actually works. With an employer contribution of 23.68% of salary poured in on your behalf, understanding TPS is not a nice-to-have — it is essential to making informed decisions about your career, your finances, and whether opting out could ever make sense.

This guide covers every aspect of the TPS as it stands in 2026, including the 2015 CARE scheme, the legacy Final Salary section, contribution tiers, the McCloud remedy, death and ill-health benefits, and the real cost of walking away from the scheme.

The Two Sections of TPS

The 2015 CARE Scheme

All active TPS members now build up benefits in the Career Average Revalued Earnings (CARE) scheme introduced on 1 April 2015. Every year you work in a TPS-eligible role, you earn a pension credit equal to 1/54th of your pensionable pay for that year.

That credit is then revalued each April by CPI inflation plus 1.6 percentage points. This revaluation protects the real value of benefits built up decades earlier. In a year where CPI is 3%, your existing credits grow by 4.6%.

Example: A teacher earning £40,000 in 2025/26 accrues £40,000 ÷ 54 = £740.74 of annual pension that year. Over a 30-year career on rising salaries, those annual slices compound into a substantial guaranteed income.

The Final Salary Section (Pre-2015)

Teachers who were members before 1 April 2015 have benefits built up under the older Final Salary rules preserved separately. The accrual rate for most members was 1/80th of final salary per year of service, plus a lump sum of 3/80ths per year. Some members had a 1/60th rate without the automatic lump sum.

Normal Pension Age for Final Salary benefits is 60 (for those with pre-2007 service) or 65 for service between 2007 and 2015.

Following the McCloud remedy (see below), members must now review which section applies to their benefits in the "remedy period" of 1 April 2015 to 31 March 2022.

Contribution Tiers for 2026/27

Employee contributions to TPS are tiered by annual pensionable pay. The tiers apply to the full salary — there is no banding system as in some other schemes.

These contributions are paid from pre-tax salary, which means tax relief is built in automatically. A basic-rate taxpayer effectively pays only 5.9% net on the 7.4% tier; a higher-rate taxpayer pays only 4.4% net on the 7.4% tier.

Employer Contribution

The employer (your school or local authority) currently contributes 23.68% of your pensionable pay to TPS. This is not money that appears in your payslip — it goes directly to the scheme — but it represents a substantial proportion of your total remuneration. On a £40,000 salary, that is £9,472 per year paid by your employer solely towards your pension.

Normal Pension Age and Early Retirement

Normal Pension Age (NPA)

For benefits built up in the 2015 CARE scheme, the Normal Pension Age is 65 (or State Pension Age if that is later, once future legislative changes are reflected). You can draw your pension at NPA without any reduction.

For preserved Final Salary benefits, NPA is 60 or 65 depending on when that service was accrued.

Actuarial Reduction for Early Access

You can access your TPS pension from age 55 (rising to 57 from 2028) if you retire early, but your pension will be permanently reduced. The reduction is based on actuarial tables that account for the longer payment period.

These figures are approximate because TPS applies tables published by the Government Actuary's Department. The key message: retiring five years early costs roughly a fifth of your annual pension for life.

Phased Retirement

TPS permits phased retirement from age 55: you can draw part of your accrued pension (at least 20%) while continuing to work, as long as your new role is at a lower grade or fewer hours. This is a valuable option for teachers approaching the end of a demanding career.

The McCloud Remedy — What It Means for TPS Members

The McCloud judgment found that the 2015 transition from Final Salary to CARE schemes unlawfully discriminated against younger scheme members. The government's remedy gives eligible members a choice for the period 1 April 2015 to 31 March 2022 (the "remedy period"):

• Legacy (Final Salary) benefits for the remedy period, or
• Reformed (CARE) benefits for the remedy period

This choice is made at retirement (not now), when you can see which is more valuable. HMRC and the Teachers' Pension Agency sent "Remediable Service Statements" in 2024/25 showing projected figures under each option.

For most mid-career teachers, the CARE scheme will be more valuable for higher-earning years; for those with long service at lower grades, Final Salary may be better. The critical point is that you do not have to decide now and the choice is protected until you retire.

Death in Service and Ill-Health Retirement

Death in Service

If you die while in active TPS membership, a death grant of three times your annual pensionable pay is paid as a lump sum. This is not subject to inheritance tax if paid to a nominated beneficiary (as a discretionary payment). Nominate your beneficiary through the TPS member portal.

A survivor's pension is also payable to an eligible spouse, civil partner, or nominated partner — typically 37.5% of the pension you had earned (with enhancements for dependent children).

Ill-Health Retirement

TPS has a two-tier ill-health retirement arrangement:

• Tier 1: You cannot work in any capacity. You receive your accrued pension immediately, enhanced by 50% of your prospective pension to NPA (i.e., as if you had worked another half of your remaining career).
• Tier 2: You cannot teach but can do other work. You receive your accrued pension immediately, enhanced by 25% of your prospective pension.

Both tiers provide a pension without any actuarial reduction for early payment. The enhancement makes ill-health retirement one of the most generous protections in any UK pension scheme.

TPS and the State Pension

TPS is a contracted-in scheme (post-2016), which means you build up full State Pension entitlement alongside your TPS benefits. There is no interaction to worry about — both pensions are paid in full.

However, for financial planning purposes, many teachers rely on combined TPS plus State Pension income. A teacher retiring at 67 with 30 years of CARE accrual on average earnings of £38,000 might receive:

• TPS CARE pension: approximately £21,100/yr
• Full new State Pension 2026/27: £11,973/yr
• Combined: approximately £33,000/yr

That represents a substantial replacement rate relative to a final salary of around £45,000.

The Real Cost of Opting Out

Some teachers consider opting out of TPS, typically to increase take-home pay in the short term. The numbers rarely favour this decision.

What You Lose

If you opt out, your employer stops contributing its 23.68%. You cannot simply pocket that money — it goes back to the employer. You would need to replicate this generosity through your own private pension contributions to match the total going in.

Worked Example: £40,000 Salary

To replicate the TPS accrual with a private pension, you would need to invest approximately £13,000 per year — more than four times the take-home gain from opting out. Unless you have a specific financial reason (severe debt, short remaining career), opting out is rarely rational.

Re-Enrolling

If you opt out, your employer must re-enrol you every three years under auto-enrolment rules. You can opt out again, but each re-enrolment is an opportunity to reconsider. Benefits built up before opting out are preserved.

Alpha Pension — Civil Service Parallel

The alpha pension is the equivalent CARE scheme for civil servants and is sometimes confused with TPS. Alpha uses a 2.32% accrual rate (broadly similar in value to TPS 1/54th), but has different contribution tiers and is administered by MyCSP. Teachers are not in alpha — the two schemes are not transferable, though a transfer value calculation is possible if you move between sectors.

Maximising Your TPS

• Check your service record annually via the TPS member portal to ensure all pensionable service is correctly recorded, especially if you have worked part-time or on supply contracts.
• Additional Pension can be purchased within TPS in units of £250/year of additional annual pension. This is often better value than a private AVC for mid-career teachers.
• Consider the 50/50 option only if you genuinely need to reduce contributions temporarily — you build up only half the normal pension accrual but pay half the contributions.
• Review your McCloud statement to understand whether legacy or reformed benefits favour you at retirement.

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Use our Teachers' Take-Home Pay Calculator to see exactly how TPS contributions affect your monthly pay across every contribution tier, and our Pension Calculator to model what your accrued CARE pension might be worth at retirement.