NUT BRIEFING ON CURRENT POSITION

This briefing sets out details of the Government's proposed changes to the Teachers' Pension Scheme (TPS) and the NUT's position on the Government's proposals.  The NUT and NASUWT continue to give pensions the highest priority as part of the joint campaign to protect teachers and defend education..
The Government wants you to work longer, pay more and get less. Under its proposals:

• all teachers would have to pay an average of 50 per cent more for their pension;
• most teachers would have to work longer for their pension, with the TPS normal pension age rising to 68 for those aged 34 or under;
• most teachers' pensions at retirement would be lower due to ‘career average’ pensions; and
• all teachers would receive less during their retirement due to the switch of pension indexation to lower CPI inflation instead of RPI inflation.

The Government is refusing to negotiate further on its proposals and is now taking steps to put its proposals into law.  The core elements of the proposed TPS are:

• a career average basis for the scheme;
• an increase in the TPS normal pension age (the age at which pensions can be taken in full) for future accrual, with the normal pension age to be equal to state pension age and rising to 68 or even higher;
• an accrual rate of 1/57th of pay per year of service;
• accrued benefits for serving members of the scheme to be revalued annually in line with CPI inflation plus 1.6 per cent;
• deferred benefits for those who have left the scheme prior to retirement to be re-valued annually in line with CPI inflation;
• pensions in payment to be increased each year in line with CPI inflation;
• continuation of current provisions on optional lump sum commutation, spouses/partners pensions and death in service and ill-health benefits;
• a limited facility for non-actuarially reduced early retirement with pension reduction factors of 3 per cent per year for a maximum of 3 years for those retiring early, with other early/late retirement factors on an actuarially cost-neutral basis.

Transitional protection would allow all those within 10 years of their normal pension as at 1 April 2012 to remain on their existing pension arrangements until their eventual retirement. Those in the NPA 60 scheme who are 50 or over as at 1 April 2012 would be unaffected by most of the above changes - but they would still pay more for their pension and receive lower pension increases in retirement. Further ‘tapered’ protection would apply to those up to 3.5 years younger than the qualifying age for full protection.
Normal pension ages would rise to 68 for those aged 34 or under in 2012, to 67 for those aged 35 to 50, and theoretically to 66 for those aged over 50 (although most under 50s would receive full transitional protection and most aged over 46 would receive some limited protection).
The Government’s proposals for the TPS remain within a cost ceiling set in November 2011 and require contributions of 12.1 per cent from employers and an average 9.6 per cent from employees, compared to the current TPS contributions of 13.25 per cent from employers and 6.4 per cent from employees (excluding the past service element of the employer contribution).
The Government has also said that it proposes a long term employer ‘cost cap’ which would limit increases in the employer contribution if scheme costs were to rise. Increased longevity costs could therefore lead to higher employee contributions or, of course, an increase in pension age if the state pension age increases.
The Government has already imposed employee contribution increases in April 2012 and April 2013 and plans a further increase in April 2014, reaching an average of 9.6 per cent. Although employee contributions are now tiered to reduce the impact at the lower ends of the pay structure, the NUT remains concerned at the affordability of the higher contributions and their likely impact on ‘opt-outs’ from the scheme.

National Union of Teachers
Current as at April 2013