TPS Phased Retirement: Draw Up to 75% From Age 55

What phased retirement is

Most of the ways out of teaching are binary. You are either in pensionable service or you are not; you either have a salary or you have a pension. Phased retirement is the exception, and it is the single most underused option in the Teachers' Pension Scheme. It lets you be both at once: drawing part of the pension you have built up while continuing to teach, continuing to pay contributions, and continuing to build up the part you have not touched.

The problem it solves is a real and common one. A teacher in their late fifties is often not looking for retirement so much as relief — from a full timetable, from a leadership post that has stopped being enjoyable, from five days a week. But dropping to three days means dropping to three days' pay, and for many people the arithmetic simply does not work. Phased retirement fills that gap by letting the pension top up the reduced salary, so the drop in income is far smaller than the drop in hours.

It also has a quietly significant advantage over simply retiring early: you only expose the portion you actually draw to the actuarial reduction. A teacher who takes 50% of their benefits at 58 and leaves the other 50% to mature until their Normal Pension Age has halved the amount subject to reduction, and the untouched half carries on growing with every year of continued service. Compared with taking the whole pension at 58, that is a materially better financial outcome for someone who wants to keep working in some form.

None of this is automatic or generous by accident. Phased retirement exists because the scheme wants to retain experienced teachers in the profession rather than lose them entirely at 55, and every condition attached to it — the 20% test, the twelve-month rule, the employer certification, the three-month deadline — is there to ensure the arrangement is a genuine, sustained reduction in work rather than a way of accessing pension money early while carrying on as before. Understanding that logic makes the rules much easier to remember.

The rules in one place

Phased retirement has more moving parts than most pension options, and they are scattered across several pages of the scheme's guidance. Here they are together.

• Minimum age 55 — rising to 57 from 6 April 2028, subject to protections discussed at the end of this page.
• Up to 75% of your accrued benefits can be drawn. You choose the proportion, and if you hold benefits in both the final salary and career average sections you can take different proportions from each.
• Pensionable earnings must fall by at least 20%, measured against the average of your pensionable earnings over the previous twelve months.
• The reduction must be achieved by working fewer hours or moving to a role with less responsibility — those are the two routes the scheme recognises.
• The reduced arrangement must be held for at least twelve months.
• No break in employment is required, unlike every other retirement route in the scheme. You move straight onto the new contract or arrangement once it is agreed.
• Your employer must certify the application form.
• The application must be submitted within three months of the salary reduction taking effect.
• Final salary members get two phased retirements before fully retiring; career average members get three, but only two can be taken before age 60.
• Benefits drawn before your Normal Pension Age are actuarially reduced, using the standard early retirement factors.
• Undrawn benefits continue to accrue as you carry on contributing on your reduced salary.

The 20% test, and the 40% charge

The 20% reduction is the gateway condition, and it is worth understanding precisely because everything else depends on it holding.

The comparison is between your pensionable earnings after the change and the average of your pensionable earnings across the previous twelve months. Two features of that definition matter. First, it is pensionable earnings, not gross pay — so anything non-pensionable in your package does not count on either side of the comparison. Second, it is a twelve-month average on the before side, which means a recent promotion or a TLR picked up partway through the year affects the baseline you have to beat, and not always in the direction you expect.

The scheme recognises two ways of getting there: reducing your working hours, or changing your role to one with less responsibility. In practice that covers a move from full-time to 0.6, giving up a substantial TLR, stepping down from an assistant headship to a classroom post, or some combination. A teacher who drops one day a week from a five-day timetable achieves a 20% reduction almost exactly, which is why 0.8 is the most common phased retirement pattern in schools — but it is worth checking the arithmetic against your actual pensionable pay rather than assuming, because allowances and the twelve-month averaging can move the line.

It is worth saying that this is not a trap the scheme is trying to spring on anyone. The condition exists because phased retirement is a genuine partial retirement, and a teacher whose pay is back at its old level is plainly not partially retired. But the consequence of breaching it is disproportionate to how easy the breach is, and it is the reason phased retirement deserves more care in its first year than most people give it.

How many elections you get

Phased retirement is not a once-only option, and the allowance differs depending on where your benefits sit.

Members with benefits in both sections — which, after the McCloud remedy, is most teachers now approaching retirement — get a further layer of flexibility. Teachers' Pensions confirms that such members can take different proportions of their benefits from each section at each election. That is genuinely valuable rather than merely administrative, because the two sections carry sharply different reduction factors. Final salary benefits with a Normal Pension Age of 60 are reduced far more gently at 57 or 58 than career average benefits measured against a Normal Pension Age of 67. A teacher drawing at 58 might sensibly take a larger slice of the NPA 60 final salary tranche and leave more of the career average tranche untouched to mature.

Each election needs its own qualifying salary reduction. You cannot make one drop in hours and then use it to justify two separate phased retirements at different times — the second election requires a further reduction measured against the twelve months preceding it. In practice this produces the natural pattern the rules are clearly designed to encourage: full-time to 0.8 with a first election, 0.8 to 0.6 a few years later with a second, and full retirement after that.

How to apply

How the drawn portion is reduced

There is no special phased retirement reduction. The proportion you draw before your Normal Pension Age is reduced using exactly the same actuarial factors that apply to any early retirement in normal health — the Government Actuary's Department tables covered in detail in our guide to TPS early retirement reduction factors. Teachers' Pensions' phased retirement page simply points members to the factors and guidance section for the numbers.

The reduction is permanent for the portion you draw. If you take 50% of your career average benefits at 57 with a Normal Pension Age of 67, that half is reduced for being ten years early and stays reduced for the rest of your life. The other half is untouched, continues to grow, and will be paid at whatever factor applies on the day you eventually draw it — unreduced if you wait until your Normal Pension Age.

This is where the arithmetic of phased retirement becomes genuinely attractive compared with going early outright. Two teachers, both 57, both with £16,000 of accrued career average pension and a Normal Pension Age of 67. One retires fully and takes the lot, reduced. The other takes 50% under phased retirement and works on at 0.8. The second teacher has exposed only £8,000 to the reduction, is still earning 80% of a salary, is still adding 1/57th of that salary to the undrawn half each year, and still has a further phased retirement election and a full retirement ahead of them. The first teacher has converted everything they have into a permanently reduced pension in a single irreversible step.

If your phased retirement is taken at or after your Normal Pension Age — which is entirely possible, and the scheme's own worked example features a member aged 61 with a Normal Pension Age of 60 — then no reduction applies at all to the portion drawn. Late phased retirement of that kind is a pure win in pension terms, and it is the reason the third career average election is reserved for age 60 and above.

What happens to the part you don't draw

You remain an active member of the scheme. Contributions continue to come out of your reduced salary at whatever tier that salary falls into — which may well be a lower tier than before, since the contribution bands are based on annualised pensionable pay — and the undrawn portion of your benefits continues to build.

In the career average section, that means each further year of service adds another 1/57th of that year's pensionable earnings to your undrawn pot, and the pot as a whole continues to receive in-service revaluation each September. The fact that you are drawing part of your pension does not slow down the accrual on the rest of it.

For final salary benefits the picture needs more care, because final salary benefits are calculated on reckonable service and average salary, and phased retirement involves a deliberate reduction in salary. The scheme's final salary rules contain protections designed for exactly this situation — the "best of the last ten years" style provisions that prevent a late-career drop in pay from damaging benefits accrued when pay was higher. This is a genuinely technical area where the interaction between a phased retirement salary reduction and final salary benefit calculation deserves a direct question to Teachers' Pensions about your own record rather than a general assurance from a web page.

Death benefits and dual capacity

One consequence of phased retirement that rarely gets discussed until it matters is what it does to the benefits payable if you die. Teachers' Pensions is clear that taking phased retirement makes you a dual capacity member — a pensioner member and an active member at the same time — and that this has an effect on the in-service death benefits available to your beneficiaries.

The mechanics, as the scheme sets them out, are these. If you remain in service and are paying contributions, or if you have left service and hold deferred benefits, a death grant may still be payable to your beneficiaries on your death. However, any retirement lump sum you were paid at the point you took phased retirement would be deducted from the value of that death grant. That is logical — the scheme is not paying out the same money twice — but it means the death grant your family would receive is smaller than it would have been had you not drawn anything.

There is also a supplementary death grant. If you die within five years of taking phased retirement, or before you have received five years' worth of pension, a further grant may be available, calculated as five times your rate of pension at the point of death, less the amount of pension you had already received. This is a protection against the worst-case outcome of drawing a pension and then dying almost immediately, and it is worth knowing exists.

None of this is a reason to avoid phased retirement, but it is a reason to revisit your expression of wish form and your wider financial planning at the point you take it. The shape of what your family would receive changes on the day you become a dual capacity member, and most people never think to check.

A worked example

Teachers' Pensions publishes its own illustration in the phased retirement factsheet, and it is worth walking through because it shows the mechanics cleanly. The example concerns a final salary member taking his first phased retirement at 61, with a Normal Pension Age of 60 — so no early retirement reduction arises at all.

He has 30 years and 153 days of reckonable service and an average salary of £40,000. The calculation proceeds in three steps. First, decimalise the days: 153 ÷ 365 = 0.4. Second, add that to the whole years, giving 30.4 years of service. Third, multiply by the proportion chosen — in this case the full 75% — giving 30.4 × 0.75 = 22.8 years of service being drawn. That 22.8 years is then run through the normal final salary calculation at the applicable accrual rate, producing a pension, and a lump sum equal to three times that pension.

At the 1/80th accrual rate that applies to NPA 60 final salary service, 22.8 ÷ 80 × £40,000 gives a pension of £11,400 a year and a lump sum of £34,200. Because he is past his Normal Pension Age, none of that is actuarially reduced. He continues working on his reduced contract, and the remaining 25% of his service — 7.6 years' worth — stays undrawn, along with everything he accrues from here on.

The same member, five years earlier

Now change one thing: suppose he had taken the same 75% at age 56 instead, four years before his Normal Pension Age of 60. The service calculation is identical, producing the same £11,400 and £34,200 — but both are then multiplied by the ER1 early retirement factor for age 56, which is 0.845. The pension becomes £9,633 a year and the lump sum £28,899. He has given up £1,767 a year for life, and £5,301 of lump sum, in exchange for receiving the pension four years sooner.

Whether that is a good trade depends entirely on what the four years of partial retirement are worth to him, which is not a question the arithmetic can settle. But laying the two out side by side is the right way to frame the decision, and it is what a personal estimate from Teachers' Pensions will let you do with real numbers.

Phased versus full early retirement

For a teacher who has decided they cannot keep going at full intensity, the real choice is usually not "retirement or no retirement" but "phased or full". They behave very differently.

Phased retirement wins on almost every financial measure, which raises the obvious question of why so few teachers use it. The honest answer is that it depends on something outside the pension system entirely: a school that is willing and operationally able to offer a suitable reduced role. If your department cannot absorb a 0.6 timetable, or if stepping down from a leadership post would leave the school without a workable structure, phased retirement is simply not available to you regardless of what the pension rules permit. That employer dependency, not the pension arithmetic, is the real limiting factor.

There is also a third route that sits outside this comparison altogether and is worth knowing about: if your departure is being driven by your employer through redundancy or restructuring, premature retirement with mandatory compensation may be available, under which the employer is legally obliged to make up the actuarial reduction for the rest of your life. That is covered in our guide to premature retirement versus early retirement, and it is materially more generous than either option on this page where it applies.

The age 57 change in April 2028

Phased retirement is available from 55 today, but the Normal Minimum Pension Age across UK pensions rises from 55 to 57 on 6 April 2028. Teachers' Pensions has published its understanding of how the protections work: a member would retain a Normal Minimum Pension Age of 55 if they had service in the Teachers' Pension Scheme before the announcement of the change on 4 November 2021, and members with service in the final salary and/or career average scheme up to 3 November 2021 will retain the right to take Early (actuarially adjusted) Retirement or Phased Retirement from age 55, subject to an application being made and the relevant retirement conditions being satisfied.

Anyone who first joined the scheme after 3 November 2021 should plan on a minimum age of 57 for phased retirement. Anyone reaching 55 before April 2028 is unaffected. The uncertainty bites specifically for teachers with pre-November-2021 service who will be 55 or 56 in the late 2020s, and for that group it is genuinely worth building some flexibility into the plan.