John Ralfe, an independent pensions expert, is convinced that the National Union of Teachers has misled members in a fact sheet it gave them ahead of today’s strike.
The NUT insist that their wording is correct; not being a pensions guru, I can only present the two sides of the argument.
The key bit is near the top of the second page, “How much longer does the government want me to work?” The document says that older teachers will be affected: “Anyone aged 57 or less would have to work to 66 and anyone aged 42 or less to 67 (to get their teachers’ pension in full.)”
Here is what Ralfe (former head of corporate finance at Boots) told me:
The Hutton Report recommended an increase in the current retirement age of 60 for most public sector workers to 66, in line with the state retirement age, and is a crucial part of the current negotiations between the government and public sector unions.
The NUT’s document is a misleading interpretation of what the higher retirement age really means for individual teachers. The right to retire at 60 is protected for pensions earned before the change – expected to be 2015 – and Lord Hutton is clear that if someone chooses to draw this pension later than 60, the amount will be increased on an actuarially fair basis, just like the state pension.
Someone aged 51 today (presuming the change occurs in four years’ time) would have to work only an extra year to 61 to receive their full pension and someone age 46 would have to work two extra years to 62.
Why haven’t ministers pointed this out?
The NUT say their sentence is entirely accurate. Technically speaking, they have a point, which is that they are talking about the ages at which members can take their pensions “in full“.
In other words, if you retire at 63 or 64, the portion of your pension earned after 2015 will be discounted – by up to a fifth – because you are retiring “early”.
“Our point is that the changes would mean that future accrual can only be taken in full at the age of 65, or 66 or higher,” said Kevin Courtney, deputy secretary general of the NUT. “If you take it any earlier it would be actuarially reduced.”
The NUT did not refute Ralfe’s central contention, however, which is that – to get the same pension as a teacher would currently get aged 60 they would only need to work until 61.
That is because they have already built up a large pension pot which is unaffected. (Think of it as having to work six years for the last five years of pension).
Ralfe points out that the same 55-year old with 30 years service – should he work to 66 – will get a pension about 23 per cent higher than the pension they were expecting at 60.
(Although this of course ignores the impact of the government shifting to ‘career average’ pensions, which would impact different people in different ways).
Mr Courtney accepted the point: “For those who have got the bulk of their pension accrual already the government has promised that the bulk of the pension you’ve accrued will continue to be paid.”
He continued:
“Nevertheless it will take longer – possibly considerably longer – to build up the pension originally expected….Those gaining promotion close to retirement would lose out from the move to career average, and of course everyone loses further because the whole of their pension will be indexed to the lower CPI inflation rate“.
Jim Pickard
Kiran Stacey