There are three main groups of characters in this tale:
The protagonists – The UK Government
The main movers and shakers in this group are the Chancellor of the Exchequer (George Osborne) and the First Secretary of the Treasury (Danny Alexander). These gentlemen made clear some time ago that they would push through change to public sector pension schemes mainly based on the recommendations in an enquiry prepared by Lord Hutton. Their basic argument is that the country can no longer afford the pension scheme we have. The key changes that they are seeking to implement are:
– Pay more (an increase in contributions averaging 3.4% across the workforce – with protection for lower paid workers and the consequence that those on higher salaries will see their contributions increase by much more than 3.4% of salary between 2012 and 2015).
– Work longer (increase pension age in line with state pension age)
– Get less (in addition to an already implemented change to the escalator for pensions in payment [from the Retail Price Index to the always lower consumer price index] the plan is to introduce a Career Average Re-valued Earnings or CARE pension scheme from 2015).
Following a revolt by the victims (see below) the UK Government revised its initial offer with the main change being that those within 10 years of pension age would see no change in what they would receive and those a further three years from retirement would receive an as yet undefined soft landing. Some have argued that this was a cynical attempt to buy off ‘older’ workers to prevent further strikes and reduce public sympathy while making big cuts to the value of pensions for those more than 13 years from retirement.
The middlemen – The Scottish Government
John Swinney is the money man for the Scottish Government. Through him, the Government has argued against some of the proposed changes and against the way some changes have been implemented. In the Spring of this year the Scottish Government set up separate negotiations with employee representatives from each scheme – one of these groups related to the Scottish Teachers Superannuation Scheme. The work of this group has been held up, to a degree, by four things:
1) A lack of clarity about what the Scottish Government has the power to vary from the arrangements agreed south of the border.
2) The determination by the UK Government that no-one should be better or worse off in Scotland than in the rest of the UK as a result of pension changes.
3) The fact that the UK Government (through the Treasury) seems to have the power to veto pretty much any changes agreed in Scotland that it doesn’t like the look of.
4) The combined position of the Scottish and UK Governments that there is no more money available beyond the cost ceiling agreed at the UK level.
The Scottish Government, including our Cabinet Secretary for Education and Young People, has been consistent in its message to the UK Government and to AHDS that they opposed the increase in employee contributions imposed by the UK Government in April this year. They have also shared correspondence in which they have repeatedly sought clarity from the UK Government about the degree of control the Scottish Government has to take a different approach in Scotland.
The victims – The pension scheme members
Not a great deal to be said about this group that you don’t already know – it is made up of you, your colleagues and your unions. However the proposed and implemented changes will affect different scheme members in different ways. There are three groups within the scheme:
– Retired members – This group has seen a change to how their pensions are increased in line with inflation. This is now done by reference to an index which will always produce a lower increase than was the case in the past (the move from RPI to CPI). This affects the value of pensions for everyone who is already in receipt of a pension or who becomes a pensioner.
– Less than 13 years to retirement – This group has either full (if within 10 years of retirement) or partial protection from the proposed changes to scheme design though they will have to pay higher pension contributions for the remainder of their career and there will be a negative impact on the long term value of their pensions due to the change from RPI to CPI.
– Everyone else – Those more than 13 years from retirement will feel the full force of the proposed pension changes if implemented. Estimates suggest that for a new entrant to the profession who goes on to become a HT mid-career there will a reduction in the value of their pension (when measured against the current position) of more than 30%. The impact for those already in service will be less as the new arrangements for accruing pensions will only take effect from the time they are implemented – accumulated service will be preserved under the current scheme rules.
All of the teaching unions, including AHDS, are currently engaged in negotiations with the Scottish Government about whether and how the redesign negotiated at Westminster should be adjusted for implementation in Scotland.
At the moment it is anyone’s guess what the end of this story will be. Until the ink is dry on the legislation next year we will keep you up to date with developments.
We will be providing you with a little more information about the pension negotiations and seeking your views through an on-line survey. Please look out for the link to the survey in your e-mail inbox.