Public Service Pensions Review
Updates: January, February, March, April 2013
Update: January 2013
Teachers' Pensions (England & Wales): Increases to contributions from 1 April 2013 to 31 March 2014
Update: 21 December 2012
Updates: 21 & 28 November 2012
Update: 24 October 2012
Update: 4 October 2012: Teachers' Pension Scheme
At the end of October 2012, the DfE will announce the start of a formal 12 week public consultation, setting out proposals for implementing the preferred design structure and distribution approach for the contribution increases that will apply to the Scheme from April 2013.
The consultation will invite views on the tiered structure (including the salary ranges and the contribution rate applying to each tier); any potential equality implications; and the potential administration issues as result of the proposals. When the consultation begins, it will be available via the Teachers' Pensions Website.
Teachers' Pensions will run a series of webinars about the proposed changes throughout November 2012:
- Tuesday 13 November, 1pm – 2pm
- Thursday 15 November, 1pm – 2pm
- Monday 19 November, 10am – 11am
- Friday 23 November, 1pm – 2pm
- Thursday 29 November, 10am – 11am
The sessions have been organised to provide further clarification about the proposed changes and offer you an opportunity to raise any issues and ask questions.
To attend one of these webinars, please register online.
Update: 13 September 2012
Update: 12 September 2012
Update: 1 August 2012
Update: 27 June 2012
Update: 26 April 2012
Update: 2 April 2012
Update: 9 March 2012
(Voice's Council has reluctantly agreed to this final offer on the basis that it is an improved offer and the best that could be achieved in the circumstances.)
Update (Scotland) 23 January 2012 + 16 March 2012
March 2012: The Scottish government has opened pension talks with the teacher unions, with a meeting, attended by the EIS, the Scottish Secondary Teachers’ Association, NASUWT, School Leaders Scotland, Voice, the Association of Headteachers and Deputes in Scotland, and Cosla, chaired by Education Secretary Michael Russell.
Council decision on Heads of Agreement for Teachers’ Pension Scheme England & Wales
Voice's National Council has endorsed the decision to sign up to the Heads of Agreement [see 20 December 2011 below] which set out the way forward for the Teachers’ Pension Scheme in England and Wales.
This decision was made on the basis that:
- this represented a significant improvement on the Government's proposed Reference Scheme;
- the Government had insisted that this was its final offer; and
- there exists the real possibility that these gains may be lost if agreement is not reached.
The Council made the decision with some reluctance because the deal still leaves teachers paying significantly more for their pensions and working to ages beyond which many think they will not continue to be fully effective.
The Government is fully aware of these concerns but considers that the arguments for change are compelling.
In a meeting held on 19 January 2012, Michael Gove reconfirmed that the Heads of Agreement constituted the Government's final offer and that the terms of it were non-negotiable.
There are some issues in Annex A of the Heads of Agreement document which are still to be discussed. Negotiations will now continue on these issues.
Although the teachers' unions are divided on whether to sign the Heads of Agreement or not, all eight unions will be part of the ongoing discussions if they so choose.
Voice's Council will consider the matter again when the final document is completed and will make the decision on whether to agree the whole package. Voice will not be balloting members on this but members are encouraged to let me know their views – as some have already done – in order to inform Council's decision. Please send your comments to firstname.lastname@example.org
Update: 20 December 2011
Statement on pension negotiations
On 19 December 2011, Voice: the union for education professionals signed up to the heads of agreement, which commits the union to seek members’ opinions on the latest Teachers’ Pension Scheme proposals and continuing talks in the new year.
General Secretary Philip Parkin said:
“After intensive negotiations between the government and unions, we have reached a position that is worth serious consideration by our executive national council.
“Voice's decision on whether to accept or reject the deal for teachers in England and Wales will be made by Council when the full details have been negotiated.
“Council's decision will be informed by reactions and responses received from members.”
Note to members:
If you have views which you would like Council to consider in reaching a decision, please:
email email@example.com or write to:
The General Secretary, Voice, 2 St James’ Court, Friar Gate, Derby DE1 1BT.
A deadline for responses, along with further details of the pensions offer, will be published here as information becomes available.
Statement by the Chief Secretary to the Treasury, RT Hon Danny Alexander MP, on Public Service Pensions (20 December 2011)
Teachers' Pension Scheme Heads of Agreement (20 December 2011) (pdf)
Department for Communities and Local Government:
Scottish Teachers' Superannuation Scheme: Consultation on Employee Contribution Rate Increases – Draft Amendment Regulations: The Scottish Government recently published a consultation on proposals for potential increases in the level of contributions scheme members will be required to make to the Scottish Teachers' Superannuation Scheme from 1 April 2012 (see 28 November 2011 below). Following that consultation, the draft regulations that will provide for the increased contributions to be applied from April 2012 have been prepared. The attached consultation provides a copy of those draft regulations which are issued for consultation and comment (until 3 February 2012).
Update: 16 December 2011
DfE: Final Teacher Pension Scheme Member Contribution Changes for 2012-13 Announced
The Department for Education has today published the outcome of the consultation for members’ contributions to the Teachers’ Pension Scheme (TPS) in financial year 2012-13. This is the first year of savings, which are being phased-in over a three year period. "Contribution changes for 2013-14 and 2014-15 form part of the ongoing discussions with unions about long-term reform of the Teacher Pension Scheme."
Scotland: Update, 28 November 2011
Update: 2 November 2011
Speech Rt Hon Danny Alexander MP, Chief Secretary to the Treasury, Statement on Public Service Pensions, 2 November 2011
General Secretary Philip Parkin said:
“We welcome the Government’s improved offer, which provides a basis for ongoing negotiations.
“However, it still does not address the issues of RPI/CPI, greatly increased contributions and working longer.”
Update: 26 October 2011
Update: 10 October 2011:
The current situation (July 2011) (updated 28 July)
The Government has discussed with the TUC the broad principles of the proposed changes.
Despite no agreement having been reached, Chief Secretary to the Treasury Danny Alexander announced that the Government would be implementing progressive increases to employees’ contributions equivalent to 3.2% on average, leading to savings of £1.8 billion by 2014/2015.
The increased contributions are due to be phased in from April 2012 and the proposals are that there would be no increase for those earning less than £15,000 per annum and a 1.5% increase for those earning up to £18,000 per annum.
The Government has already changed the method of increasing pensions already in payment by moving linkage from the Retail Prices Index (RPI) to the historically less favourable Consumer Prices Index (CPI).
Further changes are expected following the Government’s consultation with the unions on scheme-specific details. See this web page and Your Voice for developments as they arise:
"The Government will start formal consultations on increasing public service pension contributions in 2012-13 by the end of this month, Chief Secretary to the Treasury Danny Alexander said today, as he set out plans for talks on reform to continue into the autumn."
25 July 2011: "Public sector pensions are not gold-plated" (ePolitix)
28 July 2011:
HM Treasury: Government consultation on proposed pension contribution changes for civil servants, NHS workers and teachers: "The consultations published today apply to the Civil Service... the NHS in England and Wales and teachers in England and Wales.... Scheme specific talks will make proposals by the end of October 2011 on how savings of £2.3 billion in 2013/14 and £2.8 billion in 2014/15 are achieved."
DfE: "Consultation on reforms to the Teachers’ Pension Scheme":
DfE: Consultation on Proposed Increases to Contributions for Members of the Teachers’ Pension Scheme (Closing Date: Thursday 20 October 2011): "On 19 July 2011 the Chief Secretary to the Treasury set out the principles that would apply to increases in contributions for members of unfunded public sector pension schemes, including the Teachers' Pension Scheme (TPS). This consultation sets out the Government's proposals for how those principles will be applied to the TPS, and seeks views on whether the proposed contribution tiers meet the Government's principles."
Taking positive action on pensions:
Pensions: What has happened so far? Our views? Our Stance?:
The Budget: 23 March 2011
In his Budget in March, the Chancellor of the Exchequer supported Lord Hutton’s Report and made it clear that the intention was to move to career average schemes by 2015. The Chancellor confirmed that Lord Hutton’s Report should be used as a basis for consultation with unions and employers.
George Osborne, Chancellor of the Exchequer:
Hutton report: 10 March 2011
Lord Hutton published his final report on 10 March 2011, setting out his recommendations to the Government on pension arrangements. The final report is available here, press notice/summary here and FAQs here.
- Pensions earned so far should be linked to final salary.
- Any changes will relate to the future service of existing scheme members.
- Existing final salary public service pension schemes should be replaced by new schemes, where an employee’s pension entitlement is related to their career average earnings, with appropriate adjustments in earlier years so that benefits maintain their value.
- Higher contributions for employees.
- Normal Pension Age linked to State Pension.
Voice press release: 10 March 2011
Voice comments on Hutton Report
Commenting on Lord Hutton’s final report on pensions, published today, Philip Parkin, General Secretary of Voice: the union for education professionals, said:
"What is key here is not so much the Hutton Report itself but how the Government will decide to respond to it and implement its recommendations.
"We are pleased that the report recommends ‘honouring, in full, the pension promises that have been earned by scheme members (their "accrued rights") and maintaining the final salary link for past service for current members’. However, Voice’s members, particularly those on lower salaries, will be concerned about how this will work in practice and what any move to ‘career average earnings’ would mean.
"It is unfair that education professionals will have to pay higher contributions at a time when their pay is frozen. The lower paid, such as teaching assistants and nursery staff, must be protected from increases that could force them out of their pension scheme.
"People are generally living longer and the harsh reality seems to be that public sector workers will have to pay more for their pensions and work for longer. However, whatever, their salary, they naturally feel cheated when the goalposts are moved and rules changed, especially when the country’s financial problems are not of their making.
"There was little appetite for increased contributions in Voice’s online Blog poll which asked ’Should teachers have to contribute more towards their pensions and work for longer?’
Only 16% said ‘Yes to higher contributions and Yes to working longer’, another 16% agreed with ‘Yes to higher contributions but No to working longer’ and just 3% voted for ‘No to higher contributions but Yes to working longer’. However, 65% said ‘No to higher contributions and No to working longer’.
"There must be fairness in any reform of pensions. Can this country afford not to pay its public servants what they deserve? Why should they be worse off while bailed-out bankers award themselves huge bonuses on the back of taxpayers’ money? Are we "all in it together", or are some of us more "in it together" than others?
"Members should be reassured that their pensions will not change overnight.
"The Teachers’ Pension Schemes and the Local Government Pension Scheme are statutory schemes and any changes will need to be made through normal statutory processes and consultation mechanisms between the government employers and teacher unions, including Voice."
United in Defence of Pensions: national rally Saturday 26 March 2011
Please write to your MP
Join the national rally in London, Saturday 26 March:
(11.00am, Embankment (between Waterloo and Blackfriars Bridges) passing Parliament and Trafalgar Square and Piccadilly Circus, before entering Hyde Park at Hyde Park Corner around 1:15pm, with start of rally around 1:30. Rally due to continue until around 4:30pm. (Details subject to change.)
11 February 2011:
United in Defence of Pensions
You will recall that Lord Hutton, Chair of the Independent Public Service Pension Commission is carrying out a fundamental structural review of public service pension provision (see below).
In his interim report published on 7 October 2010, Lord Hutton recommended that in the short-term the most effective option to making short-term savings would be to increase member contributions.
He also recommended long-term structural reforms, which are likely to be the focus of Lord Hutton’s final report due before the Budget 2011. The final report will consider a wide range of options including career average benefits, defined contributions schemes, hybrid schemes in addition to increasing retirement ages.
In respect of the Teachers’ Pension Scheme, significant changes were made to the Scheme in 2007 following the scheme valuation. These changes included raising the retirement age to 65 for new members, introducing a cost sharing agreement between employer and employee and increasing member contributions.
Alongside the above, the government has also announced that it will change the way the public service pension are increased from Retail Price Index (RPI) to Consumer Price Index (CPI) as from 1 April 2011. RPI and CPI are both measures of the cost of living. CPI is generally lower than RPI. RPI was 4.8% compared to 3.1% CPI for the year ending 2010. On average CPI has been around 0.7% per annum lower than the increase by RPI. This would amount to a total loss of around £15,000 on a pension of £10,000 per annum.
We are also aware that even before Lord Hutton’s final report is published, the government are attempting implement increases in Teachers’ Pension contributions of over 3%.
The message appears clear. Teachers will be expected to pay more, work longer and receive less.
Attached below a leaflet, the teachers’ unions have prepared jointly. We are united in defence of pensions. At the final page you will find suggestions as to how you can help with the campaign.
Please write to your MP, join the national rally.
8 October 2010
Independent Public Service Pensions Commission
In June 2010, Lord Hutton of Furness was commissioned by the Chancellor, George Osborne, to carry out a review of public service pensions. Apart from the Teachers’ Pension Scheme, the leading public service schemes are Local Government, NHS, Civil Service and Armed Forces.
The Teachers’ Pension Scheme, for example, is a contributory scheme administered by Teachers’ Pensions (TP) on behalf of the Department for Education (DfE). It is a defined benefit ‘final salary’ scheme. There are lump sum and pension benefits and also family and dependant benefits. The pension age is 60, or 65 for new members after January 2007.
The Local Government Pension Scheme (LGPS) is a final salary scheme with similar benefits to the Teachers’ Scheme. The Scheme retirement age is 65.
Both Schemes are contracted out State Second Pension (S2P) on a Reference Scheme Test basis that means the Schemes guarantee to pay benefits which are at least as high as those the state would pay.
Terms of reference
Lord Hutton’s Terms of Reference are as follows:
To conduct a fundamental structural review of public service pension provision and to make recommendations to the Chancellor and Chief Secretary on pension arrangements that are sustainable and affordable in the long term, fair to both the public service workforce and the taxpayer and consistent with the fiscal challenges ahead, while protecting accrued rights.
In reaching its recommendations, the Commission is to have regard to:
- the growing disparity between public service and private sector pension provision, in the context of the overall reward package – including the impact on labour market mobility between public and private sectors and pensions as a barrier to greater plurality of provision of public services;
- the needs of public service employers in terms of recruitment and retention;
- the need to ensure that future provision is fair across the workforce;
- how risk should be shared between the taxpayer and employee;
- which organisations should have access to public service schemes;
- implementation and transitional arrangements for any recommendations; and
- wider Government policy to encourage adequate saving for retirement and longer working lives.
An interim report was published on 7 October 2010 with a full report to be produced in time for the Budget 2011.
The Interim Report
The Interim Report is a long document of 170 pages (pdf). It contains a great deal of statistical information about each of the public service pension schemes. In the Foreword, Lord Hutton says:
"My interim report therefore attempts to establish a proper baseline from which we can answer the fundamental question – are public service pensions on a fair and sustainable footing that provides the best possible value for money to the taxpayer as well as adequate retirement incomes for public service employees? It is my clear view that the figures in this report make it plain that the status quo is not tenable. I believe we need to adopt a more prudent approach to meeting the cost of public service pensions in order to strike a fairer balance not just between current taxpayers and public service employees but also between current and future generations.
"In the short term, however, I consider there is also a strong case for looking at some increase in pension contributions for public service employees, to better meet the real costs of providing these pensions, the value of which has risen in recent years with most of these extra costs falling to taxpayers."
However, Lord Hutton says very clearly that the government should proceed carefully and in particular ensure that there is adequate protection and proper safeguards to protect accrued rights.
Principles for reform
In the interim report Lord Hutton sets out the principles against which long-term options for reform should be assessed. These are:
- Affordability and sustainability
- Adequacy and fairness. On this Lord Hutton says that public service pensions should provide an adequate level of retirement income for public service workers with a reasonable degree of certainty.
- Supporting productivity. This refers to avoiding barriers to the movement of employees between sectors.
- Transparency and simplicity.
Options for change
In the full report, Lord Hutton’s commission will consider short-term options and long-term options. Lord Hutton refers to short-term changes pending long-term reform. The range of short-term changes includes:
- changing the benefits structure,
- contracting public service pension schemes into the State Second Pension and
- increasing contribution rates.
The range of long-term reforms includes changing from final salary pension calculations to career average defined benefit schemes. This gives scheme members a pension pot after each period of membership (usually a year) that is based on a percentage of the salary earned in that year. Those pots are then revalued until the retirement date. Those individual pension pots are then added together to produce an overall pension.
The Teachers’ Pension Scheme and the Local Government Pension Scheme are statutory schemes. The current arrangements are set out in the Teachers’ Pensions Regulations 2010 and the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007. Any changes to either scheme will need to be made through the normal statutory process.
In the Teachers’ Pension Scheme there is a well established consultation mechanism between the government employers and teacher unions. The principle body is the Teachers’ Superannuation Working Party (TSWP).
Voice is represented by Sheila Barnes, Professional Officer (Pensions), on the TSWP. The teachers’ side of the working party made written representations to Lord Hutton (pdf) before the interim report and Lord Hutton invites further representations before the publication of his final report.
Voice will be attending a meeting of the teachers’ union representatives on Monday 1 November 2010 to discuss the interim report.
Any changes that are introduced to either the Teachers’ Pension Scheme or the Local Government Pension Scheme will not affect pension awards already made nor will they affect years of service already accrued by scheme members and pension rights based on those years of pensionable service.
Any changes will relate to the future service of existing scheme members.
Professional Officer Sheila Barnes
Voice Press Office