The country’s biggest academy trust plans to offer staff a less generous alternative to the teachers’ pension scheme next year – using money saved on employer contributions to boost teacher starting salaries to up to £45,000.
United Learning said the move – thought to be a first for state schools – would entice new graduates not currently thinking about teaching into the profession, and help young teachers save for a house deposit.
But unions have slammed the “alarming” proposals, adding “tampering with statutory public sector pensions is dangerous and unwelcome”.
Dr Patrick Roach, NASUWT general secretary, said: “We would warn any state-funded employer that is seeking to play fast and loose with teachers’ pay and conditions, they are not only playing with fire, they will get burned.”
‘Could help staff afford a house’
The trust, which has 90 schools, said it will offer teachers the choice of an alternative pension scheme from 2025, alongside the teachers’ pension scheme.
Currently, teachers have to pay between 7.4 and 11.7 per cent in pension contributions to the TPS. Employers must pay 28.6 per cent of the teacher’s salary.
Under the plan, teachers who wanted to opt out of the TPS would be able to contribute either 0, 5 or 10 per cent of their salary in a new defined contribution scheme.
The trust would contribute at least 10 or 20 per cent. The money saved by United Learning on employer contributions would go towards bumping up pay.
United Learning said the move “isn’t a cost-saving measure”, and would cost them the same whichever route teachers choose.
Salaries could rise 15 per cent
For teachers contributing nothing towards their pension and getting 10 per cent from their employer, this would equate to a 15 per cent salary uplift.
This would mean starting salaries rising across its schools outside London from £32,850 to almost £38,000, and from £39,000 in inner London to £45,000.
Leaving aside student loan contributions, it could equate to a 24 per cent increase in take-home pay.
Trust chief executive Sir Jon Coles said: “At the start of [teachers] careers particularly, an extra 24 per cent could be the difference between being able to afford a deposit on a house in a few years or not. Between being able to start a family or not. Between staying in teaching or not.”
While the TPS is an “excellent scheme offering extremely good retirement benefits”, it is also “very expensive, and inflexible”, he added.
Employer contributions have risen from 14.1 per cent in 2012, to 28.68 per cent.
But increases in retirement age have “pushed those gold-plated retirement benefits further into the future”, he added.
Unions slam ‘alarming’ plans
But unions are up in arms.
Paul Whiteman, general secretary of the school leaders’ union, NAHT added the “alarming” proposals are “wrong headed, and the timing is poor”, with a new government looking to “reset the relationship” with the sector.
Meanwhile Rob Kelsall, NAHT’s assistant general secretary, said the proposals are “completely unacceptable and fail to address the core issue of the recruitment and retention crisis within schools”.
“No teacher should have to take a hit on their pension in order to fund decent take home pay. This is shortsighted and will have profound consequences for all within the sector.”
They will meet with members next week to assess the situation and “will use all means necessary, including industrial action, to defend our members pension scheme”, Kelsall added.
Legality of plans questioned
Hundreds of private schools have pulled out of the TPS after the rise in employer contributions after getting government approval to do so.
John Cunliffe, education specialist financial adviser at Wesleyan, said this is the first time they have heard of a state school employer offering an alternative scheme.
But Carl Parker, head of industrial relations at the Association of School and College Leaders, said they are concerned “whether or not the proposal is allowable under existing funding arrangements or indeed legal”.
“Tampering with statutory public sector pensions is dangerous and unwelcome,” he added. “This is deeply troubling and we will be engaging with United Learning to raise our concerns.”
Trusts must follow TPS regulations ensuring that employees are automatically enrolled on the scheme.
Employers are also not allowed to offer inducements to transfer out of such schemes.
However United Learning said it has taken advice and it believes the proposals are fully compliant with regulations.
One in 10 young teachers already snub pension
They also pointed out that one in ten teachers aged under 40 in United Learning academies already opt out of the TPS, which is permitted. This compares to just four per cent of those aged over 40.
However they currently do not have an alternative pension.
Teachers would also be able to vary their contributions and also switch between pensions each year.
Coles added that “offering that alternative to good graduates who are currently thinking about private sector jobs (and who are less focused on retirement benefits they don’t expect to see until they’re 70 than on being able to afford housing now) might be the difference between attracting enough teachers as a system or not”.
The Institute for Fiscal Studies has previously said the “relative generosity” of employer pension contributions in the public sector has been growing over time and that there is a “strong case for rebalancing public sector remuneration away from pensions and towards pay”.
‘TPS incredibly valuable benefit’
But Cunliffe warned while it “may appeal to many teachers struggling with cost of living challenges”, they “may not fully understand the impact of losing a defined benefit pension scheme, like the TPS, until it is too late”.
“The TPS is an incredibly valuable benefit. It’s one of only eight pension schemes that are guaranteed by the UK government, it’s inflation-proofed, and it provides retirement income that’s directly tied to their salary.”
School finance expert Micon Metcalfe also pointed out the move could start an arms race of other school employers doing similar to keep up.
She added a large number of teachers pulling out of the TPS could also “destabalise” it.
