Teachers who have dedicated their lives to educating others are set to receive a lesson in finances as they learn the hard way about their state pensions.
Changes to the public sector pension scheme could see retiring teachers lose over £7,700 in pension incomes over the next decade.
The changes that were announced earlier this year mean that many teachers and other public sector workers will have to contribute more over a longer period.
Research by Wesleyan for Teachers, the financial teaching advice company, found that increased rates of inflation will also have a significant impact on the future finances of teachers.
Previously, index linked public sector pensions were switched to CPI (Consumer Price Index), instead of RPI (Retail Price Index), as the preferred measure of inflation when calculating future payment increases.
Based on the same difference between CPI and RPI, over the next ten years a teacher who retired at the beginning of 2010 will see their pension pot reduced by £7,760.67.
Simon Rake, National Sales Manager for Wesleyan for Teachers, said: “The recent change to the CPI measure of inflation for calculating pension payment increases may mean many teachers see an erosion in their retirement income. This could impact their retirement aspirations significantly and may mean many teachers are unable to achieve their retirement goals based on their current savings plans.
There is also a widening gap between a teacherís actual pension income and the amount they believe they will need in retirement. Those surveyed said they would need an average of £19,800 per year to live on.
However, according to the Hutton Report, the actual average pension income for teachers is just £10,858.
This is almost £9,000 less than teachers think they need.
Based on the current annuity rates, a teacher would need a private pension pot of £165,000 and £19,000 to generate that extra £9,000 a year they need to retire.
Teachers are not the only ones affected by the pension reforms. The new reforms will affect 2.5 million people across England and Wales.
Compare pensions with Money Expert