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NEWS


‘Race to the bottom’ risk on pensions

Public sector pensions across the UK are at risk in a misguided ‘race to the bottom’, the NASUWT has warned.

The findings of Lord Hutton’s Interim Review of public sector pensions contain an amalgam of positive and negative news for teachers.

The NASUWT welcomed the following aspects of the Independent Public Service Pensions Commission Interim Report.

‘it is wrong to say that public service pensions are gold-plated’;
the statement that public service pensions provide only ‘a modest – not an excessive – level of retirement income’;
there is a need to ensure that public service pensions provide adequate retirement incomes for retirees;
any reform must protect accrued rights;
there should be no ‘race to the bottom’ with regard to pension provision – the Commission rejects the argument that ‘the downward drift of pensions in the private sector is justification that pensions in the public sector must follow the same course’; and
the rejection of the defined contribution method as the model for reform of the current system.

The negative aspects of the Report are as follows:

there is a ‘strong case’ for looking at some increase in employee contributions;
if the Government wishes to make short-term savings, then raising [employee] contribution rates would be the most effective way;
there are clear grounds for reform of public service pension schemes, including consideration of career average as an alternative to the current final salary schemes, alternative models such as hybrid schemes and elements of scheme design, such as ensuring that normal pension ages are in line with the latest developments in longevity.

The NASUWT has consistently rejected any suggestions that the existing teachers’ pension schemes are in need of further fundamental reform. NASUWT General Secretary Chris Keates said: “If there is any drain on the taxpayer, it is not public sector pensions but the large number of private sector employers who fail to provide occupational pensions for their employees. That is the area that should be put under the microscope of reform, as all workers are entitled to a decent pension.

The Union remains of the view that the recent review of the public service pensions, including the teachers’ pension schemes, that took place in 2006 secured the long-term affordability, sustainability and viability of the schemes. This was a view confirmed by the Treasury at that time. The review increased employee contributions, introduced a facility to manage longevity by securing a cap and share arrangement of contributions between employers and employees, with a cap being placed on employer contributions, and increased the retirement age for new entrants.

The NASUWT welcomed and will continue to emphasise the positive aspects of the Report but will challenge vigorously the assertions that further reform is needed.

Despite the claims by the Commission and the Coalition Government that accrued rights should be protected, these have already been compromised by the change from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI) for the indexation of pensions from 2011, of which the NASUWT has opposed and made strong representations to the Treasury. The Report acknowledges that this change may have reduced the value of benefits to scheme members by around 15 per cent on average. When this change is combined with other reforms to date across the major schemes, the value to current members of reformed schemes with CPI indexation is, on average, around 25 per cent less than the pre-reform schemes with RPI indexation.

The full Report of the Commission is due in six months’ time.


What you can do

The NASUWT will be lobbying against any change to public service pension schemes. Members should:

consult the NASUWT website for more information on pensions;
contact your MP as a matter of urgency to argue against any change to existing provision and seek their support.


RPI to CPI – calculate its effect on you

Members can now calculate how the change from the RPI to the CPI will affect them.

The Union has launched an online ready reckoner, which provides a forecast of the final value of a pension and the cumulative loss incurred as a result of the change to the CPI.

Details of the campaign are available, along with the ready reckoner, at www.nasuwt.org.uk/RPItoCPI.