Teachers' Pension Scheme: Annual Allowance & McCloud Guide

The scheme at a glance

Who it is for

Teachers in England and Wales, run by Teachers' Pensions

Accrual rate

1/57 of your pensionable pay earned as pension each year

Revaluation

CPI plus 1.6% a year while you are an active member

Normal Pension Age

Linked to your State Pension Age; managed via My Pension Online

How the Teachers' Pension Scheme works

The Teachers' Pension Scheme is the career-average (CARE) pension for teachers in England and Wales, run by Teachers' Pensions.

How your pension builds:

•You earn 1/57 of your pensionable pay as pension in each year of service.

•Each year's slice is revalued annually, by CPI plus 1.6% while you are an active member, so it keeps its value.

•Normal Pension Age is linked to your State Pension Age.

•You track and manage it through My Pension Online.

Legacy final-salary service:

•Service before 2015, or before your protected transition date, may sit in the earlier final-salary scheme, with a Normal Pension Age of 60 or 65.

•Since April 2022, following the McCloud changes, all active teachers build career-average benefits.

Source: https://www.teacherspensions.co.uk/

The McCloud remedy for teachers (2015 to 2022)

If you taught between 1 April 2015 and 31 March 2022, the McCloud remedy gives you a choice for those years.

What it means for you:

•For the remedy period you can take the final-salary benefits or the career-average benefits, whichever is better for you.

•You make the choice at retirement, when the scheme shows you both figures. This is the Deferred Choice Underpin.

•The choice can change your Annual Allowance position for those years, so a past pension-tax charge may need revisiting.

There is nothing to do now. Keep your records, and check the position when your remedy statement arrives.

Source: https://www.gov.uk/government/collections/how-the-public-service-pension-remedy-affects-your-pension

Why headship can trigger an Annual Allowance charge

The Annual Allowance is where teachers most often meet an unexpected tax bill, and moving into headship is the classic trigger.

Why a promotion matters:

•A step into headship or senior leadership raises your pay, which raises how fast your promised pension grows.

•That growth is valued at 16 times the yearly increase, so one large rise can cross the £60,000 Annual Allowance.

•The scheme may not warn you, because it does not always know your other income or pensions.

Also worth watching: a high-inflation year, extra income from supply or private tutoring (which can taper your allowance), and any backdated pay landing in a single year.

Source: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

When advice fees can be reimbursed

For the McCloud remedy, the Teachers’ Pension Scheme can reimburse regulated financial advice on your remedy-period choice.

What you can claim:

•Normally up to £500 for regulated financial advice, decided case by case.

•No separate accountancy cap, unlike the NHS scheme.

•Advice paid for before your remedy statement is not covered.

Source: https://www.teacherspensions.co.uk/members/scheme-changes/transitional-protection/contingent-decisions-and-financial-loss.aspx

Illustrative example

How a new headteacher can face a £9,600 bill

A teacher moves into headship on around £100,000. The pay jump re-rates their final-salary legacy service, and in a high-inflation year the promised pension grows by about £5,250. Valued at 16×, that lands over the allowance.

Rise in the yearly pension: +£5,250
That growth, valued at 16×: £84,000
The allowance for the year: £60,000
Tax on the £24,000 over the limit, at 40%: ≈ £9,600

Illustrative figures based on this scheme’s typical senior pay and a representative promotion. Your own Annual Allowance position depends on your service history, income and scheme rules.

Related guides

These guides cover the questions that usually come up next. They are written with NHS examples, but the Annual Allowance and McCloud rules they explain apply right across the public sector.

Annual Allowance

The £60,000 limit, the 16x valuation, and the taper explained.

Carry Forward

Use unused allowance from earlier years to reduce a charge.

McCloud Remedy

How the remedy period works and what your statement will show.

Illustrative, and independent

The worked example uses standard Annual Allowance mechanics and a representative promotion; your own position depends on your service, income and scheme rules. This guide is educational and is not personal advice. Remedy is not affiliated with Teachers' Pensions, the Department for Education, or HMRC.