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BeeHive  >  BeeLines  >  Ministerial Statement on the reform of the Teachers’ Pension Scheme

Ministerial Statement on the reform of the Teachers’ Pension Scheme

Twenty years’ve schoolin’ an’ they put you on the day shift.  It happens to us all doesn’t it?  But it’s not just kids that have to look out these days.  Their teachers need to keep their eyes open too. The pension realities that are sweeping through the private sector in the UK are beginning to bite in the public sector as well.  There’s been a Ministerial Statement today about the future of the Teachers’ Pension Scheme for England and Wales* (aka the TPS) and I know it will interest many advisers who have teachers as clients or who know teachers or who, like me, may be married to one; and even teachers themselves who may use the BeeHive as a source of pension information; and for anybody, really, who’s just interested in how this pension stuff is developing these days.  You’re all welcome here.  We’re all in it together.

The reform proposals that have been put out today apparently reflect an agreement that has been reached following months of talks between union and employer representatives.  The general idea, unsurprisingly, has been to look at the long-term affordability and sustainability of this massive national public sector pension scheme (it has around 620,000 active members).

There seem to me to be three big decisions that have been made with regard to the future of the Teachers’ Scheme:

  1. All new teachers joining the profession from 1st January 2007 will have a Normal Retirement Age of 65 rather than the age of 60 that applies to those currently in the profession and in the pension scheme.
  2. The amount that all teachers will be required to contribute personally towards the overall cost of the scheme will increase from 1st January 2007 to 6.4% from the current level of 6%.  So new teachers from next year and all existing teachers in the scheme will be in for the increased contribution rate of 6.4% from next year onwards.
  3. The most significant change though, in my opinion at least, is that agreement has also been reached on some kind of ‘cost sharing’ approach in the future that will see employers and the teachers themselves meeting an equal share of any future cost pressures that fall on the scheme.  Not only that, but the agreement also puts a cap of 14% on the employer contribution rate that will be set following the next valuation of the scheme which is due in 2008.

I’ll wait for a moment while that last one sinks in.  Yes, that’s right, any future cost pressures on this massive public sector scheme will not be borne by the employer side alone, but will be shared equally with teachers themselves footing half the bill.  Hmm!  It depends on what future pressures are I suppose, but obviously any changes in assumptions regarding general expectations of mortality or longevity will figure right up there with the big ones.  It will be interesting to see if this agreement on risk-sharing will extend beyond the teachers’ scheme to other monolithic schemes like those for the Civil Service and the NHS.  Watch this space I suppose.

Anyway, anyone who wants the full SP on this announcement about the Teachers’ Pension Scheme can get to a copy of the Ministerial Statement on the web by clicking the link here:

Ministerial Statement - Reform of the Teachers' Pension Scheme

It’s all go isn’t it?

Steve Bee

17 May 2006


* Parallel review processes are being conducted in respect of the Teachers' Pension Schemes in Scotland and Northern Ireland. When they are concluded, similar joint statements will be issued.


First Class, Adaptable, Sustainable - Teachers' Pension Scheme England and Wales: Consultation - 17 May 2006

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