Teaching is a rewarding profession in so many ways – it is also however extremely demanding with an often-relentless workload and seemingly endless responsibilities. For these very reasons, retiring early is often a key driver for many educational professionals. Early retirement, however, isn’t something that just happens – it has to be planned for, and this involves careful planning and consideration.
When we start to think about early retirement, there are several questions that will need to be considered if this is indeed a feasible option for you. The first question is twofold – what exactly counts as retirement and what is early? Early retirement may mean the end of teaching but not necessarily the end of your working life – you might want to change careers completely and earn in some way, just not in the way you have been.
The next question, is what does early mean to you? Generally speaking, early retirement is any retirement before normal pension age. However, in the teaching profession it’s probably fair to say that the average teacher doesn’t want to stay in the profession until the current state retirement age of 67. Most of the teachers and senior education leaders that I have come across aspire to retire in their 50s – although they may not necessarily have thought about how this will happen.
The key age for any pensions is currently 55 – this is the age that you can draw down on any pensions, whether that’s the Teachers’ Pension Scheme (TPS) or any other pensions you may hold. The minimum pension age is increasing to 57 from April 2028 and could affect some members. Although some will have the minimum pension age of 55 protected.
It’s worth noting here that there are some key points you’ll need to be aware of in terms of when you access your pension, ranging from actuarially adjusted benefits to your employer putting forward premature retirement to you, plus other options such as phased retirement, retire and return and age-related benefits. This is where professional support can be extremely useful, to help you navigate your way through all these as each scenario carries its own complexities which you must understand before making a commitment.
Phased retirement
Phased retirement has increased in popularity in recent years, it allows teachers and senior education leaders to continue in the profession but reduce their hours to start the adjustment to life outside of work. Many find this an attractive option as it removes the cliff edge that some people find retirement can bring.
In a nutshell, phased retirement allows you to reduce your working week by at least 20% or below and enables you to access up to 75% of your pension and lump sum. This means that you can continue to remain in the teacher’s pension scheme and accrue further benefits to the 25% still retained within it, and then when you decide to retire altogether you can take the remaining benefits out of the scheme.
For some, this provides the ability to have the best of both worlds, to begin to enjoy the start of the retirement whilst continuing to teach, but at a slower pace. It also allows you to maintain permanency of employment, although it’s important to be mindful of the fact that any benefits taken prior to your normal retirement age will receive an actuarial reduction applied to them.
For those of you who want to take benefits at your normal retirement age or beyond and still go back to teaching, there are some restrictions applied by the scheme. The abatement rule states that if a retired teacher returns to work and their combined earnings, salary and pension exceed their salary of reference, this is the highest salary in the average salary period and calculated at retirement, then their pension will be reduced to ensure their total earnings do not surpass this reference point.
Achieving financial independence
When it comes to thinking about early retirement, it’s always a good idea to start with the end in mind. Do you want to have to work until a certain age because you can’t afford to retire? Or would you prefer the comfort of knowing you are able to retire if you want to, and staying at work is a choice because you’ve planned well.
This is where it can be useful to seek professional support to help establish what your goals and aspirations are and what can be put into place to reach them. For example, paying off any debts such as your mortgage can help to reduce the stress on expenditure in retirement.
For most, the mortgage is the biggest monthly expense and therefore the biggest saving when wanting to retire early. Therefore, it’s important to define what your income needs will be in retirement to ensure your daily expenses are covered, plus any other outgoings. This typically involves working out the minimum you’ll need to spend each year to have the lifestyle you want, taking into consideration any dependants and so forth.
A Specialist Financial Adviser can use specialist tools such as the Cash Flow Modeller tool to help you build a realistic and informed financial plan of your income and outgoings for both now and in the future. This digital tool is customisable, by plugging in events such as when you expect to pay off your mortgage, when any pensions will start, when your children might go to university etc. it enables you to visualise your life in numbers. Helping you to identify risks, play out different scenarios and sketch out a financial road map. Seeing your future in numbers can provide clear answers to questions such as when’s the earliest that you can retire, how can you achieve your dream retirement goals or show you how to pass your wealth on to your family tax efficiently.
Most people like having choices and the freedom and flexibility that brings with it – teachers are no exception. It’s about giving yourself financial independence by having the reassurance that you’ve built up a sufficient retirement income to fund the lifestyle you desire, and that you have the ability to hand in your notice and leave when it feels right for you.
If you would like support or guidance on understanding your financial position, speak to a Specialist Financial Adviser or Planner at Wesleyan Financial Services for a financial review by visiting Financial advice for teachers. Charges may apply. Learn more about our charges here.
We will not charge you until you have agreed the services you require and the associated costs.
About: William Adams is a Specialist Financial Adviser, from Wesleyan Financial Services, supporting teachers, school leaders and their families with financial planning to secure their financial futures.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.
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