Teachers ‘losing £20K per year’ due to pension changes

Hundreds of thousands of teachers could be owed ‘age discrimination’ compensation over pension scheme changes, say lawyers
27th August 2019, 4:57pm


Teachers ‘losing £20K per year’ due to pension changes

Teachers' Pensions Challenge

The government could face legal challenges from hundreds of thousands of teachers over changes to their pension scheme.

That’s according to lawyers who successfully challenged the government over changes to judges’ pensions.

Manchester law firm Leigh Day believes teachers, like judges, also have a case for a legal challenge on the grounds of age discrimination - because older teachers who are within 10 years of retirement have been allowed to stay on the old, more beneficial conditions.

Read: ‘Nightmare’ £7bn pension cost could hit teacher pay

Warning: Teachers ‘can’t afford’ to pay into pensions

Need to know: Who will pay for teachers’ pensions?

Leigh Day partner Nigel Mackay said teachers were being “shortchanged”.

He said: “In terms of losses, our current estimates are that teachers would need to invest around £20,000 extra per year on average during their working lives - for example in a private pension scheme - to make up for the pension they lose because of the changes, depending on individual circumstances.”

The firm won a Court of Appeal ruling last year that changes to judges’ pensions had discriminated against judges on the grounds of age, race and equal pay because younger judges had been forced to leave the Judicial Pension Scheme while older judges were allowed to remain. The ruling also covered a separate challenge brought by firefighters in relation to the same issue.

In June this year, the Supreme Court rejected the government’s application to appeal the ruling, bringing the case to a close.

Leigh Day is now preparing a similar claim on behalf of teachers (and doctors) relating to changes that took effect on 1 April 2015 when teachers under a certain age were moved from final-salary arrangements to career-average arrangements within the Teachers’ Pension Scheme. A dedicated website for information about the claims has been created.

Should the government lose, it may have to reverse changes to the Teachers’ Pension Scheme by adjusting all of the teachers’ pensions calculations to make it as if they had been paying into the scheme under the old arrangements, the lawyers claim.

Or else, they say, it may have to pay teachers a lump sum that would be equivalent to covering what they have lost through the changes to their scheme.

Earlier this month, the Teachers’ Pension Scheme annual accounts for 2018-19 revealed the expected impact of the Court of Appeal ruling could cost an estimated £7 billion in “past service cost”.

Pensions expert Tom Selby, senior analyst at investment firm AJ Bell, told Tes: “This would be the overall cost of putting members in the position they would have been in before the changes.

“The logic [of the original exception government made for older teachers] was that people who were closer to retirement age had less time to plan so the government tried to alleviate the impact on those people.”

Leigh Day is also representing around 15,000 police officers whose claims for age discrimination have been lodged with an employment tribunal.

A spokesman for the law firm said: “As was the case with judges’ pensions, younger teachers and doctors have been forced to move onto a new government pension scheme which is less beneficial than their old scheme. Older teachers and doctors, who are within 10 years of retirement, have been allowed to stay on the old scheme”.

They said the negative consequences of the changes were “only now being realised by many public sector workers”. 

A Treasury spokesperson said: “We respect the Court’s decision and confirmed in a written statement to Parliament on 15 July that we accept the judgment applies to all main public service pension schemes. This includes the pensions schemes for the NHS and teachers. We remain committed to public sector pensions that are fair to both workers and tax payers. We are now considering how best to implement the decision.”

Nigel Mackay added: “Although the principle of the judgement applies across the public sector, the Treasury is not saying it will provide compensation to anyone who has not brought a claim, therefore we’re bringing a claim to ensure that when it goes on to succeed we are then on the employment tribunal system to be awarded compensation.”

You’ve reached your limit of free articles this month

Register for free to read more

You can read two more articles on Tes for free this month if you register using the button below.

Alternatively, you can subscribe for just £1 per month for the next three months and get:

  • Unlimited access to all Tes magazine content
  • Exclusive subscriber-only articles 
  • Email newsletters

Already registered? Log in

You’ve reached your limit of free articles this month

Subscribe to read more

You can subscribe for just £1 per month for the next three months and get:

  • Unlimited access to all Tes magazine content
  • Exclusive subscriber-only articles 
  • Email newsletters