Update 5 March 2014
It has been announced today that, despite protestations from AHDS and others, the Government will go ahead with increases to employee contributions from 1 April 2014 as were proposed in the recent consultation outlined in the last entry.
Pension discussions continue in two groups. The first is looking at the machinery and governance required for the new pension scheme from 2015. The second is a longer term group looking at the impact of working longer on the profession.
Update 19 December 2013
When the UK Government first announced that there would be changes to public sector pensions one part of that announcement was that employee contributions would be increased over three years. 2014 will see the third part of those increases. Yesterday, the Scottish Government (via the SPPA) started a consultation on how this increase might be implemented. Once again, they plan to implement the increases as has been done in England and Wales - arging that they have no option but to do so.
The proposals as they stand, to be implemented in April 2014, would see tiered increases to contributions so depending on earnings you would see the following increase in employee contributions:
Total Employee pension
contribution rate 2014/15
AHDS will respond to the consultation making clear our opposition to the increases, particularly the continued determination that they should be tiered increases. The key reasons for this opposition are that:
- In moving to a Career Average pension scheme there is no justification for tiered contributions. This is simply a cash grab from promoted post holders.
- The Government and Local Authorities are finally recogising that there is a very significant problem recruiting to school leader posts. This, combined with recent changes to Child Benefit, will have a considerable impact on incomes of school leaders and consequently the desirability of these posts. Actions taken in relation to pensions will act against other efforts to encourage greater interest in school leadership.
If you wish to make a personal response to the consultation visit the SPPA website. The consultation closes on 26 January.
The negotiations to develop a different approach to pension scheme design in Scotland have been unable to develop proposals which would better serve Scotland's teaching workforce and keep in line with HM Treasury demands. All through the negotiations with the Scottish Government the controlling hand has been with HM Treasury in London who have been unwilling to accept our group's challenges to their assumptions and plans. As such, these negotiations have been brought to a close. There are now two pensions groups that we are involved with:
- Early retirement working group - This group is looking at options, outside pension scheme design, to lessen the impact of pension reform on those who currently have a NPA of 60 but who will not benefit from any protection when the new pension scheme comes into being in 2015. The group has met once and will meet again early in 2014 to consider information about possible Teacher Refresh schemes.
- Scheme governance - This group is considering how, under new legislation demanding more rigid scheme governance arrangements, how this should be developed for the Scottish Teachers Superannuation Scheme and who should be involved.
Update 28 February 2013
Following on from the consultation document referred to below, the Scottish Government today placed a 'negative instrument' in Parliament which will, if not oppposed by MSPs, introduce further tiered increases to employee contributions which will be effective from 1 April 2013.
The revised employee contribution rates proposed in the legisation are as follows:
|FTE Earnings £|
Contribution rate from
1 April 2013
15,000 - 25,999
26,000 - 31,999
32,000 - 39,999
40,000 - 44,999
45,000 - 74,999
75,000 - 99,999
100,000 and above
AHDS believes these rates fall disproportionately on school leaders, come at a time when this group is already disproportionately affected by benefit changes and will have a further negative effect on an already precarious situation in terms of school leader recruitment. AHDS argued against these increases and made a strong case for either flat rate or no increase. We will once again make these arguments with MSPs in an effort to change the legislation before it takes effect.
Update - 20 December 2012
The Scottish Government (via the Scottish Public Pensions Agency) is consulting on proposed increases to pension contributions to take effect in 2013. The Government's proposals mirror the plans in England and Wales as no consensus was reached at the pension negotiating group on how these increases should be handled. No association representing scheme members was in favour of any increase whatsoever but there were differing views about how the increase might best be implemented if the Government insisted on proceeding.
AHDS has some considerable concern about the proposals set out in the consultation paper as they unjustifiably and iniquitously have a much greater negative impact on promoted post holders. We do not believe there is any justification for implementing tiered contributions on the teaching workforce. The proposals would have those in management positions face a considerably greater hike in percentage contributions than the rest of the profession. This comes at a time when the Government has decided that a new Career Average Re-valued Earnings scheme replace the current pension scheme - an approach which will also disproportionately affect those in management positions. Combined with the removal or reduction of Child Benefit for those earning over £50,000, these changes will have a material and disproportionate impact on the personal finances of school leaders. All of this is set against a backdrop where local authorities are struggling to find candidates to take on promoted posts - particularly primary HT posts.
AHDS will respond to the consultation early in the New Year expanding upon these points. We will also write to members in the New Year with a summary of our thoughts on each of the consultation questions to assist them in making personal responses. In the meantime you can access the consultation document here:
Note: Negotiations on scheme redesign continue with no concrete proposals yet coming to the fore. Members will be kept up to date as negotiations progress.
Update - 10 September
You can now see the papers being considered by the Pensions Negotiation group on-line at
Update - 04 July 2012
Late yesterday all unions received a copy of correspondence between John Swinney (Scottish Government Cabinet Secretary for Finance) and Danny Alexander (Chief Secretary to the Treasury). This was accompanied by an explanatory letter from Michael Russell (Cabinet Secretary for Education and Lifelong Learning). In short, the Scottish Government is still unclear what power they have to vary the design of pension schemes in Scotland. The UK Government has, since pension negotiations began in Scotland a few months ago, continued to place new restrictions on what the Scottish Government may do in this area. A consequence of this is to compromise the Scottish Government efforts to negotiate a way forward in Scotland with Scottish stakeholders. Negotiations will continue but with parameters still unclear (though it is clear that flexibility is reducing) it will be difficult for negotiations to make much progress.
Update - 29 June 2012
In the past week there have been meetings of the full Scottish Teachers Pensions Scheme Negotiating Group (STPSNG - involving all unions, employers, the pensions agency, Government Actuaries and Scottish Government officials) and a smaller Technical Working Group (AHDS is one of the unions representing the teachers side on this group) which will look at the data underpinning the current UK proposals and any alternative options developed by the STPSNG. Some helpful papers were provided by the Government Actuaries Department in advance of the latest meeting which will take some time to interrogate and will form the basis for discussion at the next technical working group.
There is still a lack of clarity about the degree of flexibility the Scottish Government has to reach an agreement different to the one agreed for England and Wales. There is also yet to be any finalised arrangements regarding further increases in employee contributions (in 2013/14 and 2014/15) soth of the border and this will have considerable implications for what can be done in Scotland.
A full programme of meetings has been arranged running through the summer break and up until 19 December when it is expected that negotiations will conclude.
Update - 17 May 2012
A positive meeting was held by all unions involved in the Pension negotiations where a 'Teachers Side' was established ready to engage with the Scottish Government pensions group. The group agreed working arrangements and to press the Scottish Government to establish a programme of meetings for the Pensions Negotiating Group.
Update - 25 April 2012
In a short meeting the membership and scope of a pensions negotiating group were agreed. It is envisaged that this group will meet monthly to explore the possibility of altering the UK Government pension offer for application in Scotland. It was not clear how much room for manoeuvre the Scottish Government was being given by HM Treasury - therefore it was not clear to the group either. It was agreed that this was one of the first things that needed to be addressed for the group to make progress. It is expected that the group's deliberations will conclude by the end of 2012.
Update - 11 April 2012
In March, the Scottish Government committed to engage with Scottish Unions to discuss how the pension reforms may be implemented differently in Scotland (though within the same cost envelope). Today, the Scottish Government has sent Unions copies of recent correspondence between John Swinney and Danny Alexander (Chief Secretary to the Treasury) which sets out a number of new ways in which the discussions between the Scottish Government and Unions about alternative implementation arrangements in Scotland will be constrained by Westminster. These are new constraints and, at present, it is not clear what is up for negotiation. The next meeting between the Scottish Government and key interests in Scotland, in which AHDS will take part, is planned for 25 April. Watch this space for updates.
Update - 01 March 2012
The SPPA has issued a circular (to view circular 2012/2, click here) telling employers to increase employee pension contribution rates from 1 April 2012. This follows a consultation by the SPPA on proposals to introduce tiered increases in contributions depending on salary level. In response to that consultation AHDS, other unions and CoSLA argued that the increase in contributions was inappropriate and should not be taken forward. We also argued that if it was to be taken forward then it should be a flat rate increase for all staff as higher percentage contribution rates for higher earners would have two effects - it would further reduce the financial incentive to take on headship as overall reward is effectively reduced, we also believe that tiered contribution rates are inconsistent with plans for a career average pension scheme.
The Scottish Government pressed ahead with legislation to allow this increase to happen as it has been instructed to have arrangements in place for 1 April by HM Treasury. Curiously, as the negotiations on pension change continue at Whitehall the position on this is not settled and unions for promoted staff which are directly involved in the negotiations are still pressing for amendment to the tiered contribution rates...watch this space for updates.
Update - 29 February 2012
The previously publicised petition regarding the move from RPI (Retail Price Index) to CPI (Consumer Price Index) as the escalator for pensions in payment which was put to Westminster now has more than 109,000 signatures and will be debated in the Westminster Parliament on Thursday 1 March. The petition will remain live, and people will be able to continue adding their signatures. Further information about the debate can be found on the Committee's website at http://www.parliament.uk/bbcom The Government will publish a further response to this petition following the debate.
Update - 24 February 2012
On 20 December 2011 the initial phase of UK negotiations concluded with the announcement of an outline agreement (Heads of Agreement - see below) which would be subject to further negotiation in 2012. To date, only two teaching unions (ATL and ASCL) have signed up to the agreement with others either making no commitment or rejecting it. In the meantime, negotiations have been continuing and are expected to conclude in the next few weeks. As these negotiations are specific to the Teachers Pension Scheme and other public service pension schemes in England (rather than the Scottish Teachers Superannuation Scheme) no Scottish Unions have direct involvement. However, the negotiations and the UK Government's plans are equally important for Scottish teachers as the Scottish Government as made clear its belief that its hands are tied and therefore any reforms made south of the border will largely be implemented here too.
The UK Government considerably improved its offer in advance of strike action on 30 November, in which around 2/3 of AHDS members participated, and has made further concessions as negotiations have progressed but there is still some way to go before matters are settled and some details remain part of the confidential negotiations. Bearing this in mind, AHDS does not - at this stage - plan to take steps to participate in a further day of action planned for 28 March. Instead, we will review our position when the current round of negotiations conclude and, as part of that, will consider the Scottish Government position on whether they plan to amend UK proposals for implementation in Scotland.
Members should watch these pages for updates.
The UK Government is seeking to change the pension arrangements of all Public Sector workers. There are three strands to the reforms:
1. A move from RPI (Retail Price Index) to CPI (Consumer Price Index) as the escalator for pensions in payment. Over time this will have a considerable negative effect on pension values. The change was taken to the courts and deemed legal. It is currently the subject of a Public Petition which has achieved over 100,000 signatures and will now be considered by the Parliamentary Backbench Business Committee to decide whether it will proceed to the House of Commons for debate in 2012.
2. Increase in employee contributions by an average of 3.4% of salary (or 50% of current contribution levels). The reality of this is that the UK Government has pledged to protect lower paid workers which means that those on higher salaries (a threshold of around £26,000 is currently being proposed) will see an increase much greater than 3.4% of salary. For AHDS members, current proposals are likely to result in an increase in pension contributions more like 75%. When combined with a pay freeze and high inflation this will mean a significant decrease in disposable income.
3. Longer term reforms as proposed in the Hutton Report. These include a move to a career average pension scheme (which would again have a disproportionate effect on promoted staff) and plans to bring the pension age for employment pensions in line with those of the state pension. This means a signigicant increase in the retirement age.
The second and third changes are the subject of ongoing consultations and negotiations. The negotiations are taking place at the UK level. Neither the Scottish Government nor Scottish Unions are directly involved. The Scottish Governemnt has made clear its opposition to the propoposed increases (though it believes that longer term reforms are required) but feels its hands are tied by Westminster so will be forced to implement changes agreeed in those negotiations. CoSLA has expressed a similar position. There is no table at which we can influence those negotiations which is why AHDS took the unprecedented step of balloting members for strike action on 30 November. Around 2/3 of the membership took part in that UK wide day of action. Union colleagues south of the border have been clear that true negotiations only started when the day of action had been confirmed.
Here is the 'Heads of Agreement' reached on 20 December:
OFFER: Secretary of State for Education LETTER TO CX
1. This document sets out the Heads of Agreement on the scheme design for the reformed Teachers’ Pension Scheme to be introduced in 2015. The government have made clear this sets out their final position on the main elements of scheme design, which unions have agreed to take to their Executives as the outcome of negotiations on the main elements of scheme design. This includes a commitment to seek Executives’ agreement to the suspension of any industrial action on pension reform while the final details are being resolved. Further detailed work will take place in the New Year and Executives will consult members as appropriate.
This agreement allows for further discussions on variations to the balance between the accrual rate and the CARE revaluation factor within the limits of the Government’s cost ceiling
2. The main parameters of the new scheme are provided below. Scheme-level discussions will continue in early 2012 on a number of issues not covered by this Agreement. These are outlined at Annex A.
- A pension scheme design based on career average;
- A provisional accrual rate of 1/57th of pensionable earnings each year, and the resolution of outstanding issues not covered by this agreement (see Annex A).
- Revaluation of active members’ benefits in line with CPI + 1.6% .
- Normal Pension Age equal to State Pension Age, which applies both to active members and deferred members (new scheme service only);
- Pensions in payment to increase in line with Prices Index (currently CPI);
- benefits earned in deferment to increase in line with CPI;
- Average member contributions of 9.6%, with some protection for the lowest paid (the detailed structure of which is shown in Annex B.);
- Optional lump sum commutation at a rate of 12:1, in accordance with HMRC limits and regulations;
- Spouses/Partner pension in accordance with current provisions;
- Lump-sum on death in service of 3 times FTE salary;
- Ill-health benefits the same as those in the current open scheme;
- Actuarially fair early/late retirement factors on a cost-neutral basis except for those with a NPA above age 65 who will have early retirement factors of 3% per year for a maximum of 3 years in respect of the period from age 65 to their NPA; and
- An employer cost cap to provide backstop protection to the taxpayer against unforeseen costs and risks (see paragraph 5 below and Annex C).
3. The Government set out the gross cost ceiling of 21.7% and the net cost ceiling of 12.1% in Public Service Pensions: good pensions that last, Cm8214. Provided as Annex E to this Agreement is a report by the scheme actuary verifying that the proposed scheme design above is within the cost ceiling. This report has been prepared in accordance with the advice in the Government Actuary’s Department’s report of 7 October 2011: Cost ceilings for scheme level discussions: Advice on data, methodology and assumptions.
4. The scheme design has been reviewed by HM Treasury who have agreed the approach taken to risk management.
5. This agreement also covers arrangements for an employers’ cost cap, the treatment of NPA following further changes to SPA, and a 25 year guarantee. These are set out in more detail at Annex C.
6. In addition, attached at Annex D is a policy costings note outlining arrangements that will ensure teachers who, as of 1 April 2012, have 10 years or less to their current pension age will see no change in when they can retire, nor any decrease in the amount of pension they receive at their current Normal Pension Age. The note sets out a legal assessment of the policy as well as the data, methodology and assumptions used to determine that total cash expenditure in each and every year is no higher for the protected group than it would have been were no reform to take place.
7. Members who are within a further 3 .5 years of their Normal Pension Age, i.e. up to 13.5 years from their NPA will have limited protection with linear tapering so that for every month of age that they are beyond 10 years of their normal pension age, they lose 2 months of protection. At the end of the protected period, they will be transferred into the new pension arrangements.
8. On the basis that the scheme design in this heads of agreement is agreed, the Government agrees to retain Fair Deal provision and extend access to public service pension schemes for transferring staff. This means that all staff whose employment is compulsorily transferred from maintained schools (including academies), higher and further education institutions under TUPE, including subsequent TUPE transfers, will still be able to retain membership of the Teachers’ Pension Scheme when transferred. These arrangements will replace the current provisions for bulk transfers under Fair Deal, which will no longer apply.
AREAS FOR CONTINUING DISCUSSION IN EARLY 2012
1. The following areas will be discussed in early 2012 together with the completion of an Equality Impact Assessment. The requirement to fit the new scheme within the revised cost ceiling for the Reference Scheme published on 2 November will remain, and agreement on these issues will also be subject to review by HM Treasury to agree the approach taken to risk management, impact on cash flow and any adjustments to the accrual rate as necessary.
i) Abatement (for service accrued prior to and post 2015)
ii) Phased retirement
iii) Treatment of members who leave active service but rejoin within 5 years.
iv) Treatment of members who transfer between Public Sector Transfer Club schemes
v) Contribution rates and structure, including the distribution of years 2 and 3 of planned increases and the impact on part time and lower paid staff.
vi) Contribution rate distribution post 2015
vii) Flexibilities to allow members to pay to retire before their NPA with an unreduced pension or to increase their pension income.
viii) The implications of the pension reforms for Total Reward
Contribution increases 2012-15
Following the Independent Public Service Pensions Commission (IPSPC) review of public service pension schemes the government announced a requirement to make £2.8bn of savings over three years by increasing contributions to public sector pensions.
HMT has advised each scheme the level of savings that it expects them to make. The savings will be phased, so that in 2012-13 40% of the savings are expected, in 2013-14 80% of the savings are expected and the full savings are required by 2014-15. The savings that the TPS are required to make by 2014-15 is £815m based on salary data as of 31 March 2010.
In July 2011 the Department opened a consultation to consider the contribution increases for 2012-13. The consultation closed in October 2011 and the Department published its response on 16 December 2011. The table below shows the contribution rates to be implemented from 1 April 2012. The details of the contribution structure post 2012 will be subject to discussion with unions.
[Table removed as a separate consultation issued in Scotland with alternative proposals matching Scottish salary scales.]
The contribution rates in the table will deliver 40% first year savings as required by HMT. The Department will consult on the level of increases for 2013-14 and 2014-15.
Future increases to SPA
1. The Government’s view is that in the new scheme, for pension accruals post-2015, Normal Pension Age should be set equal to State Pension Age. This will mean that each member will have an individual Normal Pension Age dependent on their date of birth.
2. As set out in the 2011 Autumn Statement, future increase in the State Pension Age will be based on demographic evidence. The Government will discuss further the process that could be put in place to allow the views of interested parties to be considered when these decisions are made.
3. The Government’s view is that, if there are further changes to State Pension Age, there will be an automatic link to change the Normal Pension Age of members of the scheme by an equivalent amount. This also follows the recommendations of the Independent Public Service Pension Commission, to adequately manage risks to the taxpayer from further improvements to longevity. As set out in the heads of agreement, normal pension age in the main public service pension schemes will be linked to State Pension Age. The Government believes that the SPA should continue to keep pace with increases in longevity to ensure fairness between generations, and is considering the process that will be used to determine future changes to the SPA, including any increase in SPA or changes to the timing of current proposals for change to SPA. This will be based on demographic evidence. DWP consulted on this over the Summer.
4. As recommended by Lord Hutton, the Government will keep under review the link between Normal Pension Age in the public service schemes and State Pension Age to determine whether the link between the two continues to be appropriate.
Employer Cost Cap
5. As recommended by Lord Hutton, the Government proposes to introduce an employer cost cap. This would provide backstop protection for the taxpayer, protecting them from highly exceptional and unanticipated events which very significantly increase scheme costs. Accordingly, the Government believes this cap is highly unlikely to bite in the next 25 years.
6. The Government intends that only changes to scheme costs due to ‘member costs’, such as a dramatic change in longevity and as defined by previous cap and share arrangements, would be controlled by the cap. Financial cost pressures, including changes to the discount rate, would be met by employers. The employer cost cap will be symmetrical so that, if there are reductions in member costs such that the cost falls below a ‘floor’, the savings would go back into the scheme to the benefit of members, such as by improving members’ benefits or reducing member contribution rates.
7. Scheme valuations will take place periodically to assess how the cost of the scheme has increased or reduced. In the event that member costs drive the cost of the scheme above the cap or below the floor, there will be a period of consultation, before changes are made to bring costs within the cap and floor. If agreement cannot be reached through consultation, the accrual rate will be adjusted as an automatic default.
8. The employer cost cap will be set following a full actuarial valuation. The cap will be set at 2% above, and the floor set 2% below, the employer contribution rates calculated ahead of the introduction of the new scheme in 2015. Caps will not be based on cost ceilings, but on the full actuarial valuation. Should new evidence arise over the next few months about the likely impact of the cap, the Government will be willing to consider amending the level of the cap and floor.
Reviewing contribution levels and opt-out rates
9. The Government remains committed to securing in full the Spending Review savings of £2.3bn in 2013-14 and £2.8bn in 2014-15 from increased member contributions, and will consult formally on implementation in due course. The Government will review the impact of the 2012-13 contribution increases, including on opt-out, before taking final decisions on how future increases will be delivered. Interested parties will have the opportunity to provide evidence and views to the Government.
25 year Guarantee
10. The Chief Secretary set out to Parliament on 2 November 2011 an offer on public service pensions that is fair and sustainable, and one that can endure for 25 years. This means that no changes to scheme design, benefits or contribution rates should be necessary for 25 years outside of the processes agreed for the cost cap. To give substance to this, the Government intends to include provisions on the face of the forthcoming Public Service Pensions Bill to ensure a high bar is set for future Governments to change the design of the schemes. The Chief Secretary will also give a commitment to Parliament of no more reform for 25 years.
Transitional Protection - Headline policy features
It is proposed that transitional protection will be provided to those within 13.5 years of their NPA on 1st April 2012, as set out below.
All members in the current NPA 60 scheme who are aged 50 and over on 1st April 2012, and all members of the current NPA 65 scheme who are aged 55 or over on 1st April 2012 would retain their existing pension entitlements (i.e. they would remain in their current existing scheme) until they draw their benefits or become entitled to do so (other than by drawing phased retirement benefits). In the event that they were subsequently re-employed, future service would accrue benefits in the reformed TPS.
Members of the NPA 60 scheme who are aged between 46½ and 50 on 1st April 2012 would remain in the current scheme on a tapered basis, i.e. a member who was 49 years and 11 months on 1st April 2012 would retain membership of their existing scheme until 1st February 2022 (by when they would be 59 years and 9 months), and from that date they would start to accrue service under the reformed scheme. A member who is 49 years and 10 months on 1st April 2012 would remain in the existing scheme until 1st December 2021. This taper would continue on a linear basis until members who are 46 years and 7 months on 1st April 2012 remain in the existing scheme until 1st June 2015. Those aged 46½ or younger would all move to the reformed scheme from 1st April 2015
Members of the NPA 65 scheme who are aged between 51½ and 55 on 1st April 2012 would remain in their current scheme on the same tapered basis as above, but all the ages quoted would be 5 years greater, e.g. a member who is 54 years and 11 months on 1st April 2012 would remain in the existing scheme until 1st February 2022.
This approach to the 10 year protection honours the CST’s objective, by ensuring that these members do not see any change to when they can draw their benefits or the level of benefits that they will receive. The approach to tapering ensures that those closest to age 50 on 1st April 2012 will receive almost the same level of protection as those who are over age 50 and that the protection is reduced evenly for younger teachers until it reaches zero protection for those aged 46½.
Costing and behavioural assumptions
By retaining membership of the current scheme members will continue to draw the same level of benefits as currently estimated. This will ensure that the expenditure figures for the 10 years from 2012-13 will not exceed the previous estimates, as it is assumed that members will continue to retire at the same time as they previously would have.
For a period of 3.5 years from 1st April 2022 members will start to reach their current NPA (either 60 or 65) with ”mixed” service between the current and reformed TPS. However, this cohort of teachers will have accrued the vast majority of their service under the current scheme, with only limited service under the reformed TPS. It is assumed therefore that these teachers will either still draw their benefits at their current NPA (with a lower level of overall benefits) or they will continue to work beyond their current NPA until they accrue a pension broadly equal to the pension they would have accrued at age 60 under the current scheme
Initial impact assessment
Based on current age profile of the scheme, it is estimated that of the total active membership of 630k, approximately 200k members will benefit from the 10 year protection and that a further 60k members will benefit from the tapering protection.