Created on: 14 Nov 2011 | Last modified: 11 Nov 2015
The EIS believes these proposals have nothing to do with the funding of the Scottish Teachers' Superannuation Scheme. We welcome the recognition by the Scottish Government, in the consultative document, that these proposals are "unwarranted and disruptive”. We also welcome public statements from COSLA that Scottish local government employers do not wish to increase employees' contributions, recognising that these increases will demotivate staff already subject to a two-year pay freeze.
The proposal for an average 3.2% employee contribution increase, over a three-year period, appears to have been plucked out of the air to raise £2.8bn across notionally-funded schemes. The EIS is concerned that the UK Government has suspended scheme valuation of the Teachers' Pension Scheme, the Scottish Teachers' Superannuation Scheme and the Northern Ireland Teachers' Pension Scheme. These valuations would have informed teachers' unions of the impact of 2006/07 reforms on scheme costs and would have allowed informed data on scheme costs and benefits. The suspension of the valuations means that the EIS is not in a position to judge whether any contribution increase is justified. Having made it clear that we have a principled opposition to these proposals the EIS believes that we should not simply mirror the proposals for England and Wales. The EIS notes that the consultative paper makes no reference to the salary banding which applies to Chartered Teachers. On a generous interpretation this may simply be an omission. However, this could be viewed as a presumption by Government that the recommendation in the McCormac Report on the future of the Chartered Teacher Scheme will be realised.
How might any Scotland specific adjustments fit with our policy of ensuring that no-one in Scotland pays higher levels of contributions that their UK counterparts?
The EIS does not accept this principle. If there is a Scottish approach to be taken (Question 1), then it is not clear how the Scottish Government can reconcile achieving the additional contribution for 2012/13 on the Scottish adjustments while seeking to ensure that no-one in Scotland pays higher than their counterparts in England and Wales.
Do the proposed tiered employee contributions from April 2012 achieve the appropriate balance between: Protecting the low-paid; Minimising potential opt-out from the scheme; and Ensuring that they are set progressively, so that higher earners pay proportionately more?
The EIS believes that the UK Government has seriously underestimated the likely level of opt-out. The figure of 1% appears, again, to be plucked out of the air. We are concerned that the level of opt-out will be both significant and damaging. We are also concerned that increased higher level contributions for high earners will be accompanied, from 2015, with career averaging, thereby leading to a situation where this group will have to pay higher contributions for reduced pensions in retirement.
The EIS is genuinely confused by the UK Government’s intention to protect low and middle income earners. We understand that point when comparing public sector workers across schemes although there does not appear to be a clear definition of "middle income". This point requires to be made now although it will be an important factor when considering scheme re-design since we are concerned that during early years of teaching, while staff remain on maingrade scales, the risk of opt-out will be significant.
We now understand that two scheme members receive a full-time equivalent pay of under £15,000, therefore there should be no on-costs for protecting the low-paid. The limited increase proposed for those who earn between £15,000 to £25,716 and £25,717 and £32,394 is generally welcome. However, for teachers, £32,394 is Point 5 on the maingrade teaching scale. Therefore, it appears to us, that such staff will face a disproportionate rise in contributions in 2013/14. Furthermore, this is the point on which teachers will continue to be paid, depending on whatever career decisions they may choose to make in the future.
Do you consider that there are any potential equality issues? For example, is there anything in the proposals that might result in individual groups being disproportionately affected by the proposed contribution tiering?
Basing contribution rates on full-time equivalent salary will have an impact on part-time and temporary employees, the vast majority of whom are female. These employees will face unexpected increases in contributions without being able to plan for the increases and without pay increases to soften the blow. Having made that point, the EIS recognises that benefits are calculated on an FTE basis.
Are there any other specific issues around these potential increases that you would like the Scottish Government to consider?
The EIS is concerned by the decision to consult over a six-week period. While we understand the pressure of time faced by the Government, this consultation is the first stage in contribution increases and that further increases will follow in 2013-15. While the EIS is clear that the proposed contribution increases are a tax grab on public sector workers we are also clear that the UK Government will use the contribution rate in 2015 as the platform for future contribution increases which will arise from scheme redesign. The opportunity to respond has been curtailed and many scheme members may be unable to respond in the abbreviated timescale. It would be a mistake if the Scottish Government believes a limited response means acquiescence to the proposal.
Two alternative proposals have been provided to calculate the FTE salary to set the contribution rate. Which alternative do you consider effectively balances equity, fairness and administration consideration? Do you propose an alternative method?
A similar question has been raised in the consultation in England and Wales. Like our colleagues across the Teachers' Superannuation Working Party Teachers' Panel, the EIS favours Option 2. Our starting point is that teachers should pay the correct contribution rate for the FTE pensionable salary and this should be applied each month. We are not persuaded that the benefits or loss from temporary uplift or cessation of a particular salary can be described as fair. This seems a much fairer method than fixing a contribution rate once a year. While it is the case that those on incremental scales normally progress in August, general pay increases are effected from April. We also note that the proposed contribution increases apply from 1 April 2012.
From an administration perspective, do you consider that seven tiers are administratively appropriate? If not, what alternative do you propose?
The question of whether payrolls can cope with tiered contributions should have been discussed before now. Having made that point, it is clear that payroll systems have had to deal with tiered contributions in the local government schemes.
If the contribution rate is set for each year, do you think it would be appropriate to review this for significant changes in salary? If so, what threshold should be used?
As set out above, we would be opposed to a contribution rate set for each year. The EIS believes that, administratively, it will be easier to track monthly contributions based on salary than to track significant changes in salary.
What is now clear is how contribution bands will be adjusted in the future. Will the bandings be adjusted to take account of movements in actual wages, earnings or prices. This should be made clear.
Do you consider that proposals for determining the contribution rate for new staff and those with multiple-employment are appropriate?
The EIS believes that Option 2 can apply to those who join or who return to scheme membership based on FTE salary. The only way to deal with multiple employment would be to have a separate contribution rate for each employment.
