With further likely hood of industrial action from head teachers and teachers the government has updated the department for Education website explaining the proposed changes to the Teachers' Pension Scheme.
What changes is the Government proposing for the Teachers’ Pension Scheme?
What will stay the same:
- Teachers will continue to receive a guaranteed income in their retirement, unlike the majority of people with private sector pensions.
- Teachers will keep the pension and lump sum they have already earned and this will remain linked to their final salary on retirement.
- Teachers will retain options to retire at any age between 55 and 75.
What is proposed to change:
- Moving from a final salary pension to a career average pension scheme.
- A phased increase to teachers’ Normal Pension Age in line with changes to the State Pension Age.
- A rebalancing of employee and employer contributions to provide a fairer distribution between members and other taxpayers.
Why is Government proposing a move from a final salary scheme to a career average scheme?
A career average scheme is a fairer way of calculating pension benefits because everyone gets broadly the same amount of pension for every pound put in. Under final salary schemes, the most highly-paid employees take out more than is proportional to their contributions because their benefits are based on their last few, high-earning years.
Lord Hutton estimated that the most highly-paid employees can receive almost twice as much in pension payments as those with lower salary growth.
When will these changes be introduced?The increase in employee contributions is proposed to be phased in from April 2012. The rest of the changes will not be introduced before 2015.
The changes to the Normal Pension Age will be phased over a much longer period with a Normal Pension Age of 68 not expected until 2046.
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