Pension warning: Schools urged to step in

Written by: Helen Osgood | Published:
Image: Adobe Stock

The body blow of a pay freeze during the pandemic now risks being compounded by teacher pension losses due to the lack of ‘indexation’ – but schools can act to prevent this. Helen Osgood explains

At the beginning of the pandemic, nobody would have predicted that teachers’ pay, along with that of much of the public sector, would be frozen – but it was and still is.

The “tremendous effort” of teachers, support staff and school leaders was noted by former secretary of state for education Gavin Williamson, who said in a letter to schools in September 2021: “I am truly grateful for all the outstanding work done … I thank you for your continued dedication to providing the best education for our country’s children and young people.”

However, despite those warm words, the pay freeze continued. As we have already said, this was a body blow for an already demoralised and exhausted profession crushed by the on-going weight of workload and the huge demands made of them, both at the height of the pandemic and to deliver education recovery.

But there was also an unexpected consequence of the pay freeze that very few foresaw and which we now need to take action to address: “indexation”.

Pension indexing

Pensions can sound daunting and use lots of acronyms and impenetrable language, but it is important that you regularly take stock of your pension to check for any errors.

It is easy to check your pension by logging on to the Teachers’ Pension Scheme (TPS) website where you can access the information held about you – especially the contributions that have been made – to ensure everything is present and correct.

Rectifying any anomalies is much easier when done as soon as possible (while you still have pay slips and P60s to prove everything!).

If you are still working your way up through the pay scales, then you may have some way to go before you are able to claim your pension, but it is good to ensure you keep contributing so that you will be able to benefit in the years to come.

For those at the top of their respective scales and within a few years of accessing their pension, it is even more important to keep an eye on things.

Because pay has not increased in recent years for many teachers, not even with inflation, there is a risk that many teachers’ pensions could suffer losses because there has been no “indexation” – that is, an increase in pension linked to an increase in salary.

It is worth pointing out that this does not affect all teachers. For example, this issue does not apply to the career average scheme (introduced in 2015). Having said that, many teachers in the career average scheme also have past service in the final salary scheme.

The TPS regulations (2010) establish that the average salary calculation method – the “best consecutive three years in 10” – only applies indexation if the salary rate changes.

Any increase in the salary rate triggers revaluation – even a decrease triggers revaluation – but this means that during periods of pay freeze, pension benefits are not indexed, and this can lead to pension losses for teachers and school leaders.

As soon as we became aware of this problem, Voice Community, together with the other teacher unions, wrote to schools, local authorities and multi-academy trusts (MATs) to make them aware of this issue, and urging them to act (Voice Community, 2021).

The key point is that an increase in the salary rate triggers indexation, but a salary freeze does not trigger indexation. The Department for Education (DfE) accepts that this is the position.

As unions, we want the DfE to amend the TPS regulations but, even if the DfE agrees, this would not happen quickly, and certainly would not apply retrospectively to 2021/22.

There is, however, a remedy to the situation, which is not costly for schools and academy trusts, but would potentially make a significant difference to the pension levels of teachers and school leaders.

Steps to take

Governors, trust boards and school leaders have it in their power to remedy this, despite it being a problem not of their making.

A recruitment and retention payment, at any level, would change pensionable salary and this would trigger TPS indexation.

School leaders should not worry – any salary increase would be effective so this need not be costly – for example, payment of just £1 per teacher would be sufficient to trigger TPS indexation. We are not asking for a commitment for this payment to be repeated in subsequent years. However, the earlier this payment can be made in 2021/22, the greater the pension benefit.

  • Helen Osgood is national officer for education and early years at Voice Community.

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