Teachers could lose pound;450 a year after pension overhaul

8th February 2013 at 00:00
Unions condemn higher contributions as an `additional tax'

Hundreds of thousands of teachers will see their pay packets take a hit of up to pound;450 a year following the government's decision to overhaul the state pension, it has emerged.

Data released by the House of Commons Library show that any teacher earning more than pound;40,000 will lose pound;454 a year from 2017 as part of changes to the state pension. Teachers on the average wage in secondary schools will lose more than pound;380 and in primaries pound;330 (see below).

Pensions minister Steve Webb last month published a White Paper that will allow for the introduction of a single-tier pension, providing pensioners with a flat-rate state pension of pound;144 a week.

Mr Webb said the move would make for a "simple, single decent pension" as opposed to the "fiendishly complex" system that is used today. The plans mean that teachers will be forced to pay full National Insurance contributions, which, in common with many other public service workers, they currently avoid.

Overall contributions will rise by 1.4 per cent because of the change, but a cap will be introduced meaning that no one will pay more than pound;454 annually.

The move comes as teachers' pension contributions are already going up and they are suffering an overall pay freeze. The latest hit has been condemned by the classroom unions, which claimed the increase in contributions was an "additional tax" on the teaching profession.

Labour, which made the figures public, said teachers were once again losing out because of the government's pension reforms. Stephen Twigg, shadow education secretary, said the government had broken its pledge to be as open as possible when it came to announcing the changes.

"The government promised to be `absolutely transparent' about those who lost out under their changes," he said. "Now it turns out hard working teachers are going to be taking a hit in their pockets of hundreds of pounds a year."

Like other public service benefit schemes, the Teachers' Pension Scheme is contracted out of the state second pension, which is based on National Insurance contributions. This means that currently teachers pay a reduced amount in National Insurance in return for a lower level state second pension.

While most teachers will receive more overall when they retire under the new system, unions are concerned about the impact of paying more now when teachers are already suffering from their pay falling in real terms.

Chris Keates, general secretary of the NASUWT teaching union, said: "This represents not only an unjustified additional tax on teachers, but also another significant cut in teachers' pay at a time when, like other ordinary working people across the country, they are struggling to cope with the financial impact of the coalition's savage austerity measures."

Ms Keates added that the accumulation of increasing contributions and pay freezes was leading some teachers, particularly younger ones, to consider opting out of the teacher pension scheme.

The NUT's deputy general secretary Kevin Courtney agreed, adding that the repeated cuts to teachers' pay packets could lead more people to leave the profession. "Teachers urgently need a pay rise to counter the rising cost of living, higher pension contributions and the threat of higher National Insurance contributions," Mr Courtney said.

A spokesman for the Department for Work and Pensions said that the changes were needed to make the system more straightforward. "After (the) single tier (pension) is introduced, people who were contracted out in the public or private sector will pay the same National Insurance contributions as other workers.

"For the vast majority, the extra contributions they pay will be more than offset by a higher state pension when they retire."

Out of pocket
SalaryExtra annual National
Insurance contribution
(median primary school wage)
(median secondary wage)

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