Contributions rise may force teachers to drop pension plans

29th October 2010 at 01:00

Young teachers weighed down by student debt may be forced to drop out of their pension scheme if the Government goes ahead with plans to raise employee contributions, it has emerged.

Chancellor George Osborne last week revealed that public sector employees will pay an average of 3 per cent more for their pensions, which could make them unaffordable for young teachers still struggling to pay off their student loans.

The increase, which could be even higher for teachers, will be phased in from April 2012, while teachers are in the middle of a two-year pay freeze.

Teachers currently pay 6.4 per cent of their salaries in pension contributions. A teacher on point four of the main scale, earning pound;27,103, would pay pound;975 more a year, or pound;80 a month, if employee contributions were raised to 10 per cent.

Teaching union the NUT surveyed 500 NQTs about the impact of increased pension contributions and 84 per cent of respondents said they would be unable to pay an extra 2 per cent a month, while 40 per cent said they would be more likely to leave teaching as a result.

The Government says the changes will help save pound;1.8 billion a year by 2015. Its announcement follows the publication this month of an interim report on public sector pensions, which suggested that the prized "final salary" scheme may be axed.

Teachers and union experts have warned that increasing contributions could put younger teachers off the scheme altogether.

Anna Brooman, 29, an English teacher working at Devizes School and Abbeywood Community School, Bristol, has written to her MP about the problem.

"When I became a teacher five years ago, I was initially in the scheme, but opted out a little bit later because I couldn't afford it as an NQT," she said. "I was planning to opt back in but I am paying a mortgage and these changes would mean I can't afford an extra pound;60-pound;70 a month."

Martin Freedman, head of pay and pensions at teaching union ATL, said the rise in contributions would come on top of a host of other measures set to hit pensions. The pressure could lead to young or inexperienced teachers quitting the scheme, he said.

"It is going to be extremely unpopular and will be poured on top of other changes, such as the switch from using the retail price index (RPI) to the generally lower consumer price index (CPI) in calculating pension payments.

The Government is expected to start consulting with unions on the matter as soon as the Government Actuary's Department has carried out its four- yearly valuation of the scheme. This will show the shortfall between contributions and payments being claimed by retired teachers.

The shortfall is increasing every year as the number of pensions being paid out shoots up. Longer life expectancy and other factors mean there were 415,984 retired teachers receiving pensions in March 2000 and 567,012 in March this year.

This latest valuation process is expected to take longer than usual because of the switch from RPI to CPI, although the switch itself could mean the shortfall is smaller.

Teachers are also waiting for news on what the Government plans for the scheme's structure. John Hutton, the former Labour Cabinet minister carrying out a review of public sector pensions, has already said a "defined benefit" scheme will be maintained, so teachers will be assured of what their income will be as pensioners.

But his interim report stated this could be a "career average" scheme rather than the final salary scheme.

Unions seem determined to battle for the best deal over the coming months and years. Patrick Roach, deputy general secretary of the NASUWT, said teachers of all ages would do everything they could to hold on to the scheme and its benefits.

Annual rise for teachers on point four of the main pay scale


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