Teachers are opting out of saving for their retirement due to financial pressures, according to a report presented to ministers.
The School Teachers’ Review Body (STRB), which gives recommendations to the Government on teacher pay, said there was evidence of staff “opting out of the existing pension arrangements.“
It said submissions it had received had suggested this was “for cost-of-living reasons”.
Most teachers in state schools are automatically enrolled in the generous Teachers’ Pension Scheme (TPS), with their employers contributing 28.6 per cent of a teacher’s salary – alongside the teachers’ pay – for them to be members of the scheme.
But teachers also have to pay in a large portion of their salary themselves to be members, when compared with those in the private sector.
Most people in the private sector have to pay in 5 per cent of their salary to be auto-enrolled in a pension. However teachers must pay between 7.4 and 12 per cent, depending on their earnings, or opt out entirely.
They then get a fixed payment in retirement each year, for as long as they live.
Some experts have suggested that teachers should get more flexibility on their pensions, and the option to receive higher pay in return for lower payments in retirement, but the Department for Education has so far resisted this.
But in the STRB report, it says it sees “benefits” in flexibility over pensions, as long as overall remuneration is not reduced.
The report reads: “Pensions are outside this body’s remit but do form an important part of teachers’ overall remuneration. All else equal, we see benefits in maximising the value of remuneration to teachers by facilitating employee choice.
“Given we would like to see the current competitive position of teachers’ pay improved, we believe flexibility or innovation in pensions should be focused on maximising the value of remuneration to teachers and not result in reduced total remuneration.”
Earlier this year, a group of schools announced a plan to give employees the option to receive higher upfront pay in return for smaller pension contributions, but has postponed it after intervention from the Department for Education.
The proposed scheme, from United Learning academy trust, would have meant a teacher earning £39,000 could receive a pay rise taking them to almost £45,000, in return for lower employer contributions to their pension.
Recent figures from polling app TeacherTapp, for an Education Policy Institute (EPI) report, found one in six teachers would prioritise an immediate salary increase over retirement benefits.
Reacting to the STRB report, Sir Jon Coles, CEO of United Learning, said: “Very pleased to find this in the STRB report. The clearest possible advocacy of precisely the approach we are taking to pensions.”
Teachers in England will get a 4 per cent pay rise next year after ministers accepted the STRB’s pay recommendation, with additional funding of £615m coming to schools as well.
A DfE spokesperson, said: “This pay award for schools backed by major investment alongside funding for further education is in recognition of the crucial role teachers play in breaking the link between background and success and will support schools and colleges to invest in the workforce they need, so every young person can achieve and thrive in school.”
What is the Teachers’ Pension Scheme?
The Teachers’ Pension Scheme (TPS) is a defined benefit (DB) pension scheme. This is different to the defined contribution (DC) pension schemes most private sector workers have.
With a DB scheme, the employee has no savings pot. They are paying into a pension scheme to become a member of that scheme and receive a regular payout when they retire.
Under the TPS scheme, staff contribute a minimum of 7.4 per cent of their salary and schools contribute 28.6 per cent, which is used to fund the pensions of current retirees.
The employee builds up an entitlement for their retirement, and this is usually worth 1/57 of their annual pensionable pay for each year they work.
