Public Service Pensions Bill

Memorandum submitted by NASUWT (PSP 24)

 The NASUWT is pleased to have the opportunity to submit evidence to the Public Service Pensions Bill Committee.

 

The NASUWT is the largest teachers’ union in the UK and represents serving and retired teachers in all phases of education.

 

The evidence draws upon the extensive experience the Union has of teachers’ pension provision and retirement expectations. 

 

INTRODUCTION

 

1. The NASUWT is opposed to the Government’s proposed programme for public sector pensions reform which the Union believes represents an unnecessary and unfair attack on public sector pensions in general and on teachers’ pensions in particular. The NASUWT has not signed up to the proposals outlined by the Department for Education’s Proposed Final Agreement on changes to the Teachers’ Pension Scheme (TPS). In fact, unions representing over 90% of all teachers are opposed to the proposed changes to teachers’ pensions.

2. The NASUWT has no principled objection to reform of teachers’ terms and conditions. In fact , the Union has a track record of constructive engagement with the G ove rnment on a wide range of terms and conditions matters, including pension reform s agreed in 2006 to protect the taxpayer through a cap and share arrangement for contributions.

3. However, the NASUWT is opposed to the draft Bill and believes that it fails to protect the public, fails to protect the teaching profession, and fails to protect education for future generations. It also fails to fully reflect the recommendations of Lord Hutton’s Independent Public Services Pensions Commission (IPSPC).

GENERAL CONCERNS

4. The NASUWT is concerned that the provisions in the Public Service Pensions Bill, if implemented, would have a damaging impact on the morale of teachers and on future recruitment and retention in the teaching profession. The NASUWT is further concerned that the Bill, as originally drafted, is inadequate in safeguarding teachers from further damaging changes being made to teachers’ current or future pension rights.

5. The NASUWT is concerned by the scant provisions on the face of the draft Bill that deny teachers and other public service employees the protections and safeguards they deserve when planning for their retirement.

6. The Bill, as presented, leaves a great deal of the content of subsequent Regulations to be determined by HM Treasury and provides HM Treasury with more powers and discretions to determine the nature and level of public service pensions than ever before, for the most part subject to little or no parliamentary debate.

7. The Bill gives HM Treasury extensive new powers to make directions and bring forward Regulations that could radically affect members’ future benefits and accrued rights, their revaluation, normal pension age, scheme governance, future valuations and cost-capping arrangements to an extent never envisaged or discussed between stakeholders in the run up to the publication of the Bill.

SPECIFIC CONCERNS

Clause 3

8. This clause gives powers to HM Treasury to amend any legislation, including primary legislation, without restriction , opening up the possibility that, at any time, HM Treasury may make retrospective changes , potentially worsening the level of pensi on provision and denying the accrued rights of teachers and other public service employees, thereby breaking a key promise of the Coalition Government’s programme for government . This will make it impossible for individuals to organise their lives and careers or to make sensible financial plans for their retirement.

9. If the powers to amend primary legislation are to be circumscribed, as the Government claims, then this ought to be clear on the face of the Bill itself. The NASUWT believes that, without amendment, the provisions allowing retrospective ch an ges to accrued benefits under any new scheme could be challengeable at a future date in respect of individual property rights under the European Convention on Human Rights .

10. The NASUWT believes that the Bill as drafted should be amended in order to properly protect the accrued rights and entitlements of teachers and other public service workers as has been the case hitherto.

Clause 5

11. The draft Bill’s requirements for the establishment of a Pension Board to assist the scheme manager on matters of scheme governance and administration do not adequately reflect the recommendation of the IPSPC that every public service pension scheme should have ‘a properly constituted, trained and competent Pension Board, with member nominees’ and that there should be ‘a pension policy group for each scheme at national level, for considering major changes to scheme rules’, with member and employer representation, as part of the consultation and negotiation machinery.

12. Clause 5 should be amended in line with good practice and the recommendations of the IPSPC to include an explicit requirement for member representation on the Pension Board similar to that for active and retired members on trustee boards in the private sector. It is the view of the NASUWT that the Bill should require at least one third of the Board to be made up of scheme members. The Bill should also include provision to require the establishment of bodies with member and employer representation for consultation and negotiation as recommended in the IPSPC Report.

Clause 7

13. Clause 7 of the Bill goes way beyond the provision of careeraverage defined benefit schemes as proposed by the IPSPC and gives express powers to HM Treasury to define and redefine the arrangements for public service pension provision in future – whether on the basis of ‘defined benefit’, ‘defined contribution’ or ‘a scheme of any other description’.

14. This power to redefine the types of pension scheme that may in future operate for UK public service employees, subject only to a negative parliamentary procedure, is excessive in the extreme. It completely undermines the Government’s current proposals and would make it impossible for teachers to plan with any degree of confidence for their retirement, with potentially damaging effects on future education provision.

15. The NASUWT believes that HM Treasury’s discretion to determine the type of public service pension scheme arrangements for the future should be removed along with reference to ‘a defined contribution scheme or a scheme of any other description’ in Clause 7 of the Bill. The Bill should stipulate that such schemes should be defined benefit schemes.

Clause 8

16. Clause 8 on the annual revaluation of earnings/benefits provides HM Treasury with extensive discretionary powers to control and change the basis for revaluation by reference to changes in the general level of prices or earnings estimated in such manner as the Treasury considers appropriate. Allowing the Treasury such considerable scope to determine and vary the measure of revaluation, including the possibility of an increase or decrease in accrued benefits, would increase levels of uncertainty and unpredictability for scheme members over the level and maintenance of their future and accrued benefits.

17. Again, these provisions, as drafted, are subject only to the negative Commons procedure and are contrary to the recommendations of the IPSPC and the provisions of the Pensions (Increase) Act 1971 which specifically preclude reductions in pensions. They would also undermine the specific provision in the Government’s current proposals, breach the commitment to protect accrued pension rights set out in the Coalition Government’s programme for government, and further weaken the confidence of teachers and other public service employees in the value of public service pension schemes.

18. The NASUWT believes the method for the revaluation of benefits is too significant to be left to HM Treasury to determine and to be subject only to the negative Commons procedure. The Union believes the clause should be amended accordingly to limit HM Treasury discretion in this respect and remove any possibility of a decrease in benefits already accrued. We would expect the Coalition to honour their commitment to protect accrued rights [1] .

Clause 9

19. The provisions in the Bill linking NPA to the member’s state pension age (SPA) has provoked significant anger and consternation among teachers along-side other aspects of the proposed reforms. The prospect of further increases to NPA, following the increase to age 65 under the reforms introduced in 2007, have raised genuine concerns as to the reasonableness, practicality and sustainability of the provisions, given the high physical and mental demands associated with teaching, which is widely recognised, nationally and internationally, as one of the most stressful of all occupations. [2]

20. The Government has argued that increased longevity provides the justification for increasing the NPA in line with the SPA. However, the Government’s inconsistent approach is thrown into sharp relief by the proposal to treat the police, firefighters and armed forces qualitatively differently. These occupations will have a NPA fixed at 60 years of age and will see no further increases in their NPAs beyond 2015 irrespective of future longevity trends and irrespective of any future increase in the SPA. The Government has provided no objective justification of this qualitatively unequal treatment of teachers in comparison to these other occupations.

21. This could potentially discriminate against the high numbers of women who make up the public sector workforce in many roles, including teachers, and the fact that the proposed increase in SPA to 68 may be brought further forward by the Government will only exacerbate the inequity between different occupational groups.

22. This provision also ignores the recommendation of the IPSPC that ‘the link between the State Pension Age and Normal Pension Age should be regularly reviewed, to make sure it is still appropriate’.

23. The NASUWT is particularly concerned that Clause 9(4) requires that future changes to NPA ‘must ... apply in relation to all the benefits (including benefits already accrued under the scheme)’, further breaking the commitment previously given by the Coalition Government to protect accrued pension rights and contradicting the view of the IPSPC that ‘protecting accrued rights is a prerequisite for reform both to build trust and confidence and to protect current workers from a sudden change in their pension benefits or pension age’.

24. The NASUWT believes that this clause of the Bill should be substantially amended to remove the automatic link with SPA, to allow for a lower pension age than 68 for teachers (to be determined, in consultation with stakeholders, in light of emerging evidence and trends) and to preserve the commitment to protect accrued pension rights in respect of any future changes to public service pension scheme arrangements. To be absolutely clear we oppose any increase in existing normal pension age and oppose the link to state pension age.

Clause 10

25. The requirement in Clause 10 that schemes must be actuarially valued is tempered by the provision for scheme valuations to be carried out in accordance with HM Treasury directions as to how and when a valuation takes place and under what assumptions. There is no requirement for the valuation to be carried out at specified intervals, such as every four years, as under the current Regulations (although the Government seems able to circumvent the current provisions). This gives no protection to members against unreasonable delay or the use of unreasonable or biased methodologies for the purposes of conducting future valuations.

26. The NASUWT believes the provisions on scheme valuations in the Bill should be more explicit and if it is the Government’s intention that the valuations for the unfunded schemes will be carried out every four years (as stated in the Treasury note on actuarial valuations of public service pension schemes, November 2012) then the Bill should clearly state this.

Clause 11

27. The provisions in Clause 11 in respect of setting the employer contribution rate and the operation of a ‘cost cap’ for employer contributions in accordance with HM Treasury directions, give HM Treasury wide powers to specify how the first valuation is carried out for setting the cap and which costs fall inside and outside the cap. The actions to be taken when costs exceed the cost cap are to be set out in Treasury regulations, subject only to the negative Commons procedure, but may include increases or decreases in members’ benefits or contributions.

28. The NASUWT believes this clause should be amended to restrict the extensive powers of HM Treasury to take decisions which potentially will result in further detriment to scheme members and to provide for any measures to amend scheme benefits as a result of the cost-cap arrangements to be taken only after proper consultation with a view to reaching agreement with the representatives of those likely to be affected. The Bill should not provide for regulations that would have the effect of allowing the Treasury to impose changes as a result of the costcap arrangements. Any amendments should not have the effect of reducing a member’s accrued benefits.

Clause 20

29. Clause 20 seeks to give effect to the Government’s 25year guarantee of no further changes to the public service pension but to all intents and purposes the provisions in the Bill as drafted, render the guarantee meaningless. There is very little practical protection for scheme members to validate this guarantee. This is because the Bill only requires the relevant legislature to consult with a view to reaching agreement (but not necessarily to actually reach agreement) with those likely to be affected or their representatives. Furthermore, the relevant legislature is required only to have regard to the desirability of not making a change to the protected elements of the scheme, rather than requiring an objective justification for change.

30. Clause 20 specifically provides that the Government can make retrospective changes to scheme benefits and accrued pension rights again subject only to consultation with a view to reaching agreement. As a result, members of public service pension schemes would have less protection than private sector scheme members, where benefits can only be changed if the alternative benefits provided are actuarially equivalent.

31. The NASUWT has serious reservations about the practicability of securing a 25year guarantee of ‘no changes’ but believes any provisions in the Bill would need to be substantially strengthened in order to have any realistic chance of doing so. As a minimum, Clause 20 should be amended so as to include further scheme provisions within the protected elements, including at least the definition of earnings/benefits and rates of revaluation, and to require express agreement with the representatives of those likely to be affected, similar to the existing provisions of the 1972 Act for retrospective changes, before any changes under this clause can be implemented.

November 2012


[1] The Coalition: our programme for government - page 26.

[2] European Wide Survey on Teachers Work Related Stress – Assessment, Comparison and evaluation of the Impact of Psychological Hazards on Teachers in their Workplace. ETUCE http://teachersosh.homestead.com/Stress_III/Work-Related-Stress-III.html

[2]

[2] Teachers’ M ental Health – A study exploring the experiences of teachers with work-related stress and mental health problems. Research report for the NASUWT by Rothi , Leavey and Loewathal . http://www.nasuwt.org.uk/MemberSupport/NASUWTPublications/AllPublications/ResearchProjects/MentalHealthReport/index.htm

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Prepared 22nd November 2012