ASTI - Ireland's main second level teachers union

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The three teacher unions today launched a report showing that if government plans to change pension arrangements for public servants go ahead then teachers will pay more in contributions to the scheme than they will get out in pension benefits.

 

The report was commissioned from Trident Consulting by the ASTI, INTO and TUI.

The report shows that because membership of the pension scheme is compulsory for teachers, they will be forced to join a scheme from which they would expect to receive no net benefit. Proposed changes by government will effectively allow government to stop paying any employer contribution towards public service pensions for teachers.

At present  “meaningful” employer contributions are required for a private sector scheme to gain Revenue approval. The report says the proposed new public sector scheme does not meet this basic criterion.

According to Pat King, general secretary of the ASTI the result will be that public sector schemes will be less generous than private sector schemes. Mr King said future public sector schemes will be less valuable (from an actuarial perspective) than no pension provision whatsoever.

“Future teachers would be better off opting out of the proposed scheme, if allowed to do so, and investing an equivalent contribution into a PRSA.”

The value of teachers’ pensions has already been reduced significantly in 1995 and 2004. Since 1995, new teachers have an integrated pension, part paid by the Department of Education and Skills and part paid by the state through the PRSI system as with all insured workers. Since April 2004, new teachers have a standard retirement age of 65 and any retirement between ages 55 and 65 is on a cost neutral basis.

 

The Pension Levy for all public servants including teachers (average 7.5%) was introduced in March 2009 bringing the average pension contribution to 14 percent of income. 

 

The changes proposed by government are calculating pensions on “career average” earnings rather than final salary, increasing the public service retirement age to 66 and then to 68 and breaking the link with the salaries of serving teachers. Under government proposals any increases to pensions will be linked to the consumer price index.

“These three proposed changes will be devastating for the pensions of new teachers,” said Sheila Nunan, general secretary of the INTO. “There will be no net benefit from being in a pension scheme as many teachers will pay in far more than they will ever get out. This situation may be open to legal challenge especially since membership is compulsory.  It is larcenous.”

The general secretary of the TUI Peter MacMenamin said the changes were completely unnecessary. He said with changes introduced to date (1995 and 2004) the existing pension terms for teachers are entirely sustainable.

 

He said the belief that the state has to make a huge contribution to the pensions of its workers is a myth. “At present, with the pension levy, a new teacher joining the current scheme at age 21 needs only a 3.4% (of salary) contribution from the state as employer to help fund pension costs”. He said this was far less than the private sector average.

The report says the new scheme would result in a scheme pension of 26% of final salary after working for 43 years, compared to a 32% pension for working 40 years at present  (lump sum falls from 150% to 129%).

The report says alternative approaches to managing costs, and especially to curbing the gains through final salary linkage for high earners on retirement, are available. These include setting a maximum public service pension or a hybrid pension where final salary applies up to a certain threshold. 

The report also says a single pension scheme for all public servants will be complex to administer.

Click here for full Teachers' Report.

ENDS