- The Governmenthas made changes to the Teachers’ Pension Scheme thatmean teachers paying more towards their pensions, working longer and receiving a smaller pension when they retire.
- Teachers are now paying an average 9.6 per cent towards their pension. The average employee contribution rate is now 9.6 per cent – an increase of 50 per cent since April 2012. This is a thinly disguised tax on teachers.The changes were made to the scheme to save on costs, not to improve the terms of teachers’ pensions.
- From April 2015 most teachers have been moved into a new career average pension which is less generous than previous arrangements.
- The Government has linked the age at which teachers can access their teachers’ pension in the new career average section to the state pension age – for some teachers that will be at age 68! Most teachers will not be able to work successfully in the classroom to 68 so they will have to retire earlier on substantially reduced pensions. For those who do work to 68 this could mean less than a decade of good health in retirement. The Office for National Statistics has found[1] that men at 65 can expect to live for 9.9 years and women for 11.5 years in good or very good health.
- Ministers say that the previous pension scheme cost too much but they have failed to prove their claim that public sector pensions aren’t affordable. The Hutton Commission report found that the cost of the existing structure of public sector pensions would fall from 1.9 per cent of GDP currently to 1.4 per cent by 2060.[2]
- Since the TPS was set up in 1923, over £40bn more in contributions has been paid into the scheme than has been paid out in pensions. The Government has had a long cheap loan from teachers, but now baulks at paying the pensions due.
- The Government has changed annual pension indexation from Retail Prices Index (RPI) inflation to Consumer Prices Index (CPI) inflation. RPI inflation is normally higher than CPI inflation. The NUT estimates that a teacher retiring with a £10,000 pension will lose over £30,000 during the course of a25-year retirement.
- Government changes to the discount rate (a rate of interest used to value the Teachers’ Pension Scheme) mean that even though the scheme benefits have been cut and employee contributions increased, employer contributions will rise from 14.1 per cent to 16.4 per cent from September 2015.
- The real pension problem is in the private sector. Two-thirds of private sector employees aren’t in any employer-backed scheme, compared to just underhalf in 1997[3]. Employer contributions to newer “defined contribution” schemes are less than half those for final salary schemes. The cost of this is passed back to the State and future taxpayers. Cutting public sector pensions won’t help private sector workers – it will just make everyone poorer in retirement.
Produced by the National Union of Teachers
[1] Office for National Statistics, ‘Pension Trends, Chapter 3: Life expectancy and healthy ageing’, 16 February 2012
[2]