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Paying more, waiting longer and getting less

2nd November 2010

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Act now to Protect your Pension



The Hutton report (Independent Public Service Pensions Commission: Interim Report - 7 October 2010) has been announced.

There will be a second report in Spring 2011 which may add the meat to the bones of this interim report. 20th October also sees the announcement of public sector cuts which may also give further details of changes.

Why have a review?



Any changes are not because of difficulties in funding the pension scheme, but are simply part of a wider agenda of public sector workers paying for the budget deficit. Public Sector Pensions are being 'dumbed down' to level with private sector pensions. That is if, as a worker in the private sector, your employer actually offers a half-decent pension scheme, as 57% of workers either have no pension or access to one.

What the report says



Hutton does say that it is wrong to say that public sector pensions are 'gold plated' with most public sector workers getting quite low pensions, the average being a little over £5000.

The report also states that any suggestions are not designed to discourage public sector workers from paying into public pension schemes and therefore saving for their retirement, which the government encourages all workers to do.

The report hasn't said that the pension age for existing members of the scheme should rise to 65, to match new entrants to the scheme, or that it should mirror the state pension age. It does, however, state that it needs to be looked at.

Hutton supports increased contributions and very strongly supports a career average rather than final salary scheme. However, if this was implemented, it would mean a reduction in the relative value of pension rights.

How this could affect you and your pension



There are a lot of proposals that, if implemented, will result in teachers paying more, waiting longer and getting less.

It is likely that accrued rights will be protected and claimable at 60, but further contributions would only be available (without actuarial reduction) at 65. In effect, making a two tier pension for many teachers.

The government has already changed the indexing of pension increases from RPI (Retail Price Index) to CPI Consumer Price Index) from April 2011. The CPI is a lower measure of inflation. For example, a teacher retiring on a pension of £20,000 will lose over £70,000 over a 25 year retirement. If the gap between RPI and CPI is bigger they will lose even more.

With a career average pension scheme unpromoted teachers would lose out, while those promoted later in their career would lose even more. For a secondary head of faculty it could be somewhere in the region of 20% loss. Every year! However, this might be hidden by an increased accrual rate.

The possibility of increased contributions and subsequent reduction in take home pay is a huge blow, at a time of pay restraint, an upcoming two year pay freeze, a rise in the VAT rate and subsequent rise in utility, food and fuel bills.

What can you do?



Write to your MP to protest using the NUT website www.teachers.org.uk/notocuts. It is really simple and only takes a few minutes.

Come to NUT Association meetings to be kept informed of developments and any action that we might take. Dates should be on your NUT notice board in the staff room and are on the back of this newsletter.

Talk to people about Public Sector Pensions - we are not the ones who bankrupted the country and continue to be paid outrageous bonuses.

Join the Leicestershire anti-cuts campaign lead by the public sector unions.

 

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