TEACHERS AND PUBLIC SERVICE PENSIONS AGE – AN NUT PROGRESS REPORT

Teachers’ Panel

The NUT and the other teachers’ organisations met on 7 October 2003 to determine the position of the Teachers’ Panel, which comprises representatives from the teachers’ associations in primary, secondary and further and higher education in England, Wales, Scotland and Northern Ireland, to the proposals from the Government for a review of the Teachers’ Pension Scheme (TPS) to be considered at a meeting of the full Teachers’ Superannuation Working Party (TSWP) on 13 October.

The Teachers’ agreed to express a willingness to participate in a review of the TPS but to make clear its opposition to the Government’s proposal to raise the normal age of retirement to 65 and to pursue its ‘shopping list’ of improvements to the scheme.

It was noted that the matter had been discussed in the TUC on a wider basis than just public service pensions for those in the private sector who were also experiencing severe problems, with large numbers of final salary schemes being closed and replaced by inferior money purchase schemes. The TUC was considering a campaign of action that included the consideration of a national day of action. The teachers’ organisations would want to campaign against the Government proposal to raise to age 65 the minimum age at which teachers would be able to draw an unreduced pension, but the Panel believed it would be in its best interests to seek to campaign jointly with the TUC.

The Teachers’ Panel agreed that it should engage in discussion with the DfES on the positive basis of pursing the claim of the Teachers’ Panel for improvements. Particular emphasis to be placed on survivor’s benefits including in particular, unmarried partners and an accrual rate of 60ths with the option to commute part of such a pension to a lump sum. Further discussions should take place in a smaller working group and the Panel should seek to campaign jointly with the TUC.

The Panel agreed further that the teachers’ side of the smaller working group should meet to look at campaigning issues in November, after the meeting of the TSWP, and that the Teacher’s Panel would subsequently receive a report from that group.

Teachers’ Superannuation Working Party

The TSWP, which comprises representatives of the Government, education employers and the teachers’ associations, met on 13 October and considered a Position/Options paper from the Government. That paper included a proposal to raise to age 65 the minimum age at which teachers would be able to draw an unreduced pension. The DfES argued that the Green Paper on pensions provided the opportunity to introduce some changes and to modernise the TPS. Similar meetings were being held across the public sector and it was necessary to consider the position in conjunction with Inland Revenue proposals for greater flexibility, details of which were expected later in the year.

The DfES argued also that change was inevitable as the closure of many final salary pension schemes and poor stock market returns meant that circumstances were very different from those when there had last been discussions on changes to the TPS. In particular the proposal to raise the normal pension age from 60 to 65 reflected the increased costs and improved life expectancy. Other schemes, including the Local Government Pension Scheme (LGPS) and the Universities Superannuation Scheme (USS) already had a retirement age of 65 and the higher pension age would increase options for flexibilities and improvements. HM Treasury had agreed that some of the savings from increasing the normal pension age to 65 could be used for improvements to the scheme.

The DfES said that the Inland Revenue proposals would include removing the existing 15 per cent restriction on contributions allowed for tax relief; providing greater opportunity to save for retirement; and mixing work and retirement. The Government wanted to encourage those who could to work longer as reflected by the proposal to increase the minimum age at which a contributor could receive a pension, other than on grounds of ill health, from 50 to 55 by 2010.

The Teachers’ Panel presented a different perspective on a range of issues and was totally opposed to the proposal to raise the normal pension age from 60 to 65. It emphasised the huge wave of opposition amongst teachers and the very serious concerns over the increased pressure on teachers if they had to work much longer to draw the same level of pension benefits now available at age 60. The significant physical and mental demands on teachers meant that very few now worked beyond age 60.

The Teachers’ Panel maintained that many of the problems that the Government was now seeking to address had been caused by the Government. The removal of tax relief for pension funds was depriving pension schemes of around £5bn each year. This was a significant factor in private sector pension schemes moving from final salary schemes to money purchase schemes where benefits were not guaranteed and left the employee to bear the investment risks.

The Teachers’ Panel said that it had long been campaigning for a review of the TPS. It wanted the opportunity to discuss improvements to the benefits structure and would want to pursue issues identified previously. The Panel expressed concern that only a proportion of any savings that accrued from an increase in the normal pension age could be recycled to fund improvements. Following a recent review of the Armed Forces Pension Scheme (AFPS), which had resulted in improvements, Ministers had said that the review had been on a cost neutral basis.

It was agreed that in order to take discussions forward a smaller Review Sub-Group would be set up but that it would report regularly to the full TSWP.

Review Sub-Group – Teachers’ Panel

The Teachers’ Panel of the Review Sub-Group met on 18 November 2003 and first gave consideration to its position in relation to the meeting of the full Review SubGroup that was taking place on 27 November 2003. It was recognised that in terms of improvements to the TPS the key issues were moving to a 60ths scheme with the facility to commute part of the pension to provide a lump sum; improved ill-health retirement benefits; and benefits for unmarried partners. Previous costings, however, from the Government Actuary’s Department, had identified the increased contribution rate for moving to a 60ths scheme, with commutation at 12:1 (i.e. £12 of lump sum in return for giving up £1 of pension), at 1.35 per cent, and improving widows’ and widowers’ pensions, and benefits for unmarried partners to a 60ths basis as 0.25 per cent. The Government had estimated that moving to a scheme with a normal retirement age of 65 was likely to produce a saving of something around 2 per cent.

The Teachers’ Panel agreed that at the initial meeting the it would continue to argue against raising the normal pension age to 65 and in favour of its claim for improvements to the TPS.

It agreed that all existing members of the TPS, and not just those aged 50 and over at September 2003, should have full protection of their existing TPS benefits and, in particular, be able to receive their benefits, including future service benefits, at age 60 without any actuarial reduction.

The Teachers’ Panel further considered its campaign of opposition to the Government’s proposal to raise to age 65 the minimum age at which teachers and other public servants would be able to draw an unreduced pension. It recognised that a key factor was public reaction and that the TUC was committed to address the pension problem in both the public and private sectors.

The Teachers’ Panel agreed that its campaign against the Government’s proposals would need to take account of the problems in the private sector. To ignore such problems would jeopardise the support necessary for its success. Joint campaigning by all the teachers’ associations and the other public service unions would be enormously helpful. It was agreed that the Executives of constituent associations’ should consider joint lobbying of Members of Parliament in their constituencies as a the next major stage of the campaign and that should be considered in more detail at a meeting of the full Teachers’ Panel on 17 December.

Review Sub-Group – Joint Meeting

At the meeting of the full Review SubGroup on 27 November 2003 the Teachers’ Panel again made it clear that it whilst it was happy to participate in the review its position on the Governments’ proposal to raise the normal pension age from 60 to 65 remained the same as at the meeting of the full TSWP.

The Group considered a paper setting out the financial basis of the TPS following the comments made by the Teachers’ Panel at the meeting of the full TSWP in relation to the apparent difference between the review of the AFPS that had produced a ‘cost neutral’ package of improvements. The Teachers’ Panel had not been able to discuss the paper with its consulting actuaries in advance of the meeting but indicated that it would want to seek their views and feed comments into ongoing discussions.

The Group considered a paper setting out how the review might be taken forward, which focused on particular groups of issues having regard to the claim for improvements to the scheme submitted previously by the Teachers’ Panel. The Panel indicated that improvements in the benefits together with greater flexibility in the benefits structure was needed, including progress on the issue of dependants’ and survivors’ benefits.

It was recognised also that there were over-riding pieces of legislation or European directives that would be relevant to the discussions, including age discrimination legislation, an EU directive on sexual orientation, the awaited Inland Revenue proposals, pension sharing regulations and internal dispute resolution procedures.

Again the Panel emphasised that part of the problems stemmed from failures of Governments over the years and this Government needed to address policy failures.

The Government has said formal proposals for statutory consultation on changes to the teachers’ and other public service pension schemes will not be made until next autumn and will follow the consultation now taking palace.

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ATT1Circ03-182-Sup5 December 2003

TEACHERS & PUBLIC SERVICE PENSIONS

AGE NUT PROGRESS REPORT