PROPOSED TEACHERS’ PENSION SCHEME CONTRIBUTION INCREASE FOR 2012-13

The Department for Education has issued a consultation document on its proposed employee contribution increase from April 2012. The proposed employee contribution and increase from the current 6.4per cent is given in the table below:

Lower Salary / Higher Salary / Contribution rate in 2012-13 / Increase (against 6.4%) / Membership / % of membership
14,999 / 6.4% / 0% / 1,400 / 0.2%
15,000 / 25,999 / 7.0% / 0.6% / 116,000 / 17.1%
26,000 / 31,999 / 7.3% / 0.9% / 117,000 / 17.2%
32,000 / 39,999 / 7.6% / 1.2% / 271,000 / 39.6%
40,000 / 74,999 / 8.0% / 1.6% / 172,000 / 25.2%
75,000 / 111,999 / 8.4% / 2.0% / 4,000 / 0.6%
112,000 / 8.8% / 2.4% / 600 / 0.1%

The DfE’s proposals are for a banded contribution structure. A teacher would pay the same contribution rate on their whole salary rather than 6.4 per cent on the portion up to £14,999, 7 per cent on the portion between £15,000 and £25,999 etc.

The contribution tier into which teachers fall will be determined by their full-time equivalent salary. A part-time teacher working a 0.5 fraction and earning £18,000 would therefore pay 7.6 per cent. The DfE’s rationale is that it is a member’s FTE salary that is used to calculate their final pension entitlement and therefore contributions should be decided on the same basis.

The planned contribution increase in 2012-13 translates into the following contribution level for teachers on the classroom scales:

Pay Band / England and Wales / Fringe Area / Outer London / Inner London
M1 / 7% / 7% / 7% / 7.3%
M2 / 7% / 7% / 7.3% / 7.3%
M3 / 7% / 7.3% / 7.3% / 7.3%
M4 / 7.3% / 7.3% / 7.3% / 7.3%
M5 / 7.3% / 7.3% / 7.6% / 7.6%
M6 / 7.3% / 7.6% / 7.6% / 7.6%
UPS1 / 7.6% / 7.6% / 7.6% / 8%
UPS2 / 7.6% / 7.6% / 7.6% / 8%
UPS3 / 7.6% / 7.6% / 8% / 8%

This planned contribution increase is the first part of a three-year plan. The plans to raise £2.8 billion a year across the public service pension schemes by 2014-15, with approximately £768 million from the Teachers’ Pension Scheme. These changes equate to an average 3.2 percentage point contribution increase for members of public sector pension schemes. The Government’s plan is for this contribution increase to be introduced incrementally over the three years starting April 2012, on a 40%:80%:100% basis.

This would lead to an approximate contribution level by 2014-2015 of:

Lower Salary / Higher Salary / Contribution rate in 2014-15 / Increase (against 6.4%)
14,999 / 6.4% / 0
15,000 / 25,999 / 7.9% / 1.5%
26,000 / 31,999 / 8.7% / 2.3%
32,000 / 39,999 / 9.4% / 3%
40,000 / 74,999 / 10.4% / 4%
75,000 / 111,999 / 11.4% / 5%
112,000 / 12.4% / 6%

This level of contributions increase will potentially drive thousands of teachers out of the pension scheme. Not only the individual but society as a whole will suffer as a result as costs are put back to the taxpayer through social security payments.

The Government's plan is not informed by an actuarial valuation of the Teachers' Pension Scheme - which has been kept on hold for over a year despite endless requests for it to be done. The Government is not interested in the real cost of teachers' pensions, it just wants extra revenue now to pay for the costs of the recession.

We will be working alongside other teaching unions and the TUC to ensure that teachers and public sector workers are not penalised by a Government who appears to be determined to wreak havoc on a pension scheme that is sustainable, affordable and fair.

SSEE Department

August 2011