Pension contributions soar

21st January 2011 at 00:00
Increase of nearly pound;100 a month causes union outrage and predictions of industrial action

A radical overhaul of the teacher pension scheme that will see individual contributions rise by 50 per cent is to be pushed through within a month, The TESS can reveal.

The Department for Education (DfE) in London, which has the lead role for the UK-wide schemes, has revealed that contributions will rise from a current flat rate of 6.4 per cent of salary to an average of between 9.5 and 9.8 per cent by 2014-15, prompting outrage from teaching unions and predictions of industrial action.

Drew Morrice, assistant secretary of the Educational Institute of Scotland, condemned the decision and said teachers and other public sector workers were having "to pay the price for the Government's need to balance the books". The move was being taken before any valuation of the superannuation scheme had taken place, he added.

The announcement, which will save the Government between pound;768 million to pound;852 million a year, is the first time the hike in teacher contributions has been laid out in detail. Overall, annual spending on public sector pensions is being reined in by pound;2.8 billion.

For a teacher earning pound;35,000 a year, contributions are set to increase by up to pound;1,190 a year - pound;100 a month. The increases will be phased in over three years from April 2012.

The move comes on top of a two-year pay freeze for all UK teachers (from next April in Scotland), and the controversial switch from calculating pension payouts from the Retail Price Index to the generally lower Consumer Price Index.

Teachers' leaders say the announcement on extra contributions is "politically motivated", coming before the outcome of the independent John Hutton review of public sector pensions, due in March.

Unions and employers have been invited to discuss how to impose the contribution rise, which is likely to result in the highest-earning teachers paying a higher percentage of their earnings so that lower paid workers are not unfairly hit.

In a letter to the Teachers' Superannuation Committee, a cross-union group devoted to pensions, the DfE's head of pay and pensions, Paul Bleasdale, wrote that there would have to be a "tiered approach" to contributions to "strike the right balance between fairness, ease of understanding and administrative complexity."

But unions say a deadline of mid-February to finalise the details is unrealistic and motivated by the Government's desire to announce savings on budget day on March 23.

Chancellor George Osborne said in the comprehensive spending review in October that he expected all public sector pensions to rise by an average of 3 per cent.

Mr Morrice of the EIS said the contribution increases were unnecessary as the National Audit Office has calculated that public sector pension schemes, including the teachers' one, were already generating 14 per cent in savings to the Treasury on the basis of reforms already made.

He also pointed out that the watchdog said that "risk management for longevity could be dealt with." It is understood that Hutton takes a different view.

Mr Morrice continued: "Teachers are to have no pay rise, a rise in their pension contributions and a likely increase in inflation during the year ahead. That is a cocktail for a cut in the standard of living for them and all public sector workers."

Chris Keates, general secretary of the NASUWT, warned that pensions will be the issue that unites unions into taking action. She said: "Teachers will be deeply aggrieved about the coalition Government continuing to wage war on their pensions, when changes had already been agreed with the previous Government, which, according to the Treasury itself, made the scheme affordable and viable in the longer term.

"This announcement will inevitably speed up any action unions take over pensions."

The DfE said the union outrage was premature and that ministers were keen to hold discussions.

A spokesman said: "We wrote to employer groups and teaching unions, so we can work with them to look at options for how the changes could be introduced fairly and progressively from 2012-13 onwards, and whether high earners should pay proportionately more, while protecting the lower-paid members of the teacher pension scheme from the full effect of the contribution increase."

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