Mortgage Advice for Teachers and Retired Teachers

The Teachers Pension Scheme final salary section applied to service before April 2015 and uses a traditional final salary accrual approach. Pension is calculated based on years of service and final pensionable salary. Normal pension age in the final salary section is 60 for most members, with some having 65 depending on when they joined. The career average (CARE) section applies to service from April 2015 onwards and accrues pension based on each year’s pensionable earnings, revalued in line with CPI plus an additional percentage.

The McCloud remedy affected the period between April 2015 and March 2022, during which younger members had been placed in the CARE section while older members were kept in the final salary section. The remedy gives affected members the choice of having that period’s service treated under either section, with implications for both their pension figure and any lump sum. This is relevant to mortgage applications because members who were affected by McCloud may have updated pension figures following the remedy, and the figures used at the time of any earlier application may need reviewing.

Teachers Pension is inflation-linked and payable for life. Lenders generally treat it as high-quality defined benefit income for mortgage affordability. Teachers approaching retirement often take a lump sum (by commuting part of their pension) and a reduced monthly pension, and both elements feature in mortgage planning. Additional voluntary contributions and Teachers’ Additional Pension (AVCs and APB) may also feature depending on individual arrangements.

For teachers in independent schools, the pension position can be different. Some independent schools use TPS; others use the Independent Schools’ Pension Scheme or other arrangements. The principles we apply are similar but the specific scheme details will affect the documentation required.

Pension advice on TPS (whether to take the lump sum, how to time retirement, how to handle AVCs) is outside our regulated scope. We signpost to qualified pension advisers for those conversations. Our role is the mortgage element, which fits alongside the pension planning.

The Process

Your first conversation is a relaxed discussion about your teaching career, your pension, and the mortgage you need. There is no cost or obligation.

We complete a full fact-find and ask for supporting pension documentation (TPS annual benefit statement, retirement quote if available, any AVC details). We research the market and come back with a written recommendation.

Every teacher case is different. A head teacher retiring at 60 with significant final salary service is a different case from a younger teacher considering phased retirement at 58 with mostly CARE service, and our advice reflects those differences.