Golden years?

The Government’s proposal to cut pension provision is the biggest threat to the teaching profession for 30 years. Teachers and support staff face the prospect of paying more and working longer, writes John Richardson

With the publication of Lord Hutton’s review of public service pensions in March 2011, the implications for the independent sector are far worse than feared. Lord Hutton is proposing that they should no longer be part of the pension scheme.

So how many people would this affect? ATL’s Pay & Condition Survey 2010 indicated that around 90 per cent of independent sector teachers are in the Teachers’ Pension Scheme (TPS); and around 10 per cent of support staff are in the equivalent Local Government Pension Scheme (LGPS). The TPS and LGPS apply to England and Wales. There are similar schemes in Scotland and Northern Ireland.

As things currently stand, all members of the TPS face:
• a 50 per cent increase in their employee contributions;
• an increase in the default retirement age to 66; and
• an end to their final salary pensions scheme in exchange for a less beneficial career average scheme.

But, if these swingeing cuts weren’t bad enough, there is a sting in the tail for the independent sector. Lord Hutton states: “It is in principle undesirable for future non-public service workers to have access to public service pension schemes.”

So, not only do these proposals hit hard at the living standards of teachers and support staff, they could also have dire consequences for the ability of some independent schools to recruit and retain quality staff.

Pay more
Pre-empting the Hutton Review, in January 2011, the Government announced that it wanted to increase the contribution rate for the TPS from 6.4 per cent to an average of 9.8 per cent from 2014.

The move had nothing to do with the pension scheme in itself – the Government has postponed scheme valuations for more than 18 months, but followed the decision from the Comprehensive Spending Review in October 2010 that £2.8 billion of savings must be made.

ATL calculates that this would mean (per year):
• teachers would pay on average £1,145 more;
• headteachers £1,965 more; and
• support staff earning more than £24k, £525 more.

This comes on top of wage increases in the independent sector largely below the rate of inflation and, in some cases, pay freezes. Some teachers will be unable to afford such a hike in contributions. ATL’s general secretary, Dr Mary Bousted, says: “If teachers’ pension contributions are increased by virtually 50 per cent, from 6.4 per cent to 9.8 per cent, we predict a ten per cent drop in scheme members.”

ATL predicts that there will be a surge of teachers close to retirement dropping out, with many retiring early to avoid having their pensions cut. ATL is also concerned that new teachers won’t be able to afford to join the pension scheme as they will be saddled with debts from their student loans and higher tuition fees.

Work longer
Lord Hutton recommends that teachers and support staff may also be forced to work until age 66 before they can draw their pension. Working with pupils is a highly demanding job, with burnout a genuine danger. Forcing teachers to work longer will have a detrimental effect on their health and have implications for pupils.

Get less
Lord Hutton has recommended that final salary pension schemes are ended and replaced by career average pension schemes. While such a change would affect individuals differently, this would result in teachers and support staff receiving at least 15 per cent less in pension benefits during their retirement.

Threat to independent schools
Increasing the cost of pension provision, while downgrading the benefits, will make it harder to attract top quality staff into the teaching profession. However, in the worst-case scenario, exclusion from any new scheme will impact on an independent school employer’s ability to recruit and retain the best graduates and experienced teachers.

To maintain their competitiveness, employers are likely to face significant additional costs in setting up a comparable scheme. While some will be able to bear this additional cost, others may struggle to maintain their competitiveness and a few could face closure.

ATL believes that Government policy should strive to maintain the highest professional standards in the teaching profession. Without a scheme valuation, it cannot be known how the exclusion of independent school staff will affect the long-term sustainability of the TPS and LGPS. What is more, a universal pension scheme helps to establish the status of the teaching profession and facilitates the movement of teachers between the sectors. This two-way movement of teachers promotes the exchange of best practice.

Gold-plated myth
The one ray of light in Lord Hutton’s report is his rejection of the charge that public service pensions are “gold-plated” and his argument against “a race to the bottom”, referring to the low levels of pension benefits in the private sector. The gold-plated myth does not stand up to scrutiny: the average annual public service pension in payment is £7,000pa. For teachers in the TPS, it is £12,000pa; for support staff in the LGPS, it is only £4,000pa.

Affordable and sustainable
The National Audit Office (NAO) has concluded that public pensions are affordable and sustainable. In December 2010, it published an independent report into the impact of changes made in 2007-08 to public sector pensions.

The reforms included:
• increases in employee contribution rates;
• a later default retirement age; and
• cost-capping and sharing mechanisms.

The NAO estimates that, as a result, costs to taxpayers in 2059-60 will be reduced by 14 per cent. Aggregate savings over the years to 2059-60 are equivalent to £67bn in 2008-09 prices.

The Government has recently made further savings by switching the index by which the pension is annually increased from RPI to CPI. This will reduce a pension in payments by around 15 per cent on average over the period it is paid. As Dr Mary Bousted, says: “ We are furious that the Government still has not provided a full actuarial valuation of the TPS, so that no one, including the Government, knows whether the scheme is affordable.”

ATL campaign
ATL is campaigning against the proposed pension cuts under the slogan, “Pay more, Work longer, Get less”. ATL will always seek to negotiate; however, the issue is of such magnitude that ATL considers it appropriate to ask its members for their views on taking industrial action.

ATL’s members are not alone in their concern. Recent surveys of the members of heads’ unions indicate that two-thirds support action to defend pensions. ATL’s leadership wing, the Association of Managers in Education, has found similar levels of anger among its school and college leaders.

ATL is conscious that members working in the independent sector are in a different position to their state sector colleagues. Should members decide to take action, it is not aimed at the school or employer. It is also aware that some staff, such as those with boarding responsibilities, may not feel that they can take any action, regardless of their sympathy.

ATL hopes that heads and employers will appreciate the severity of the situation and why it might be appropriate for staff to make their concerns heard in the strongest possible terms. Should ATL members decide to take action, the union hopes that employers will take a sympathetic view, understanding what is at stake for their staff and their schools.

John Richardson is the ATL national official for independent schools. John can be contacted on jrichardson@atl.org.uk. 

Return to Planning