The Daily Telegraph's claim today that teachers have a "£500,000 pension pot" is misleading and their calculations wrong, Left Foot Forward can reveal.
The Daily Telegraph’s claim this morning that “a typical teacher can expect to retire with a taxpayer-funded scheme worth more than £500,000” is misleading, miscalculated and ignorant of the facts.
The misleading half-a-million-pound “typical teacher” pension figure distorts the actual level of public sector pensions by focusing on one of the better paid groups of public sector workers and assumes 37 years’ service.
The paper assumes a pension of £24,000 – yet the average teachers’ pension in payment is £10,000, as shown in the scheme’s Resource Accounts. Furthermore, they assume a teacher who enters teaching at 23 and retires at 60 with a final salary of £32,000 will have a pension of £24,000.
That assumption is wrong, as the simple calculations below explain:
• A teacher who joined the scheme on or before December 31st 2006 gets 1/80th of their final salary per year of service plus three times this as tax free cash.
• Their pension at 60 is (£32,000)X(37/80) = £14,800, + £44,400 tax free cash.
• A teacher who joined the scheme on or after January 1st 2007 gets a higher accrual rate of 1/60th of their final salary per year of service, but this can only be taken in full at age 65; there is no automatic lump sum.
• The pension available at 60 – including the current actuarial reduction factor of 0.753 – is (£32,000)X(37/60)X(0.753) = £14,859.
• This is not a pension of £24,000.
The Telegraph article also ignores the fact that teachers’ pensions are funded on a different and more secure basis than pension backed by annuities – their comparison is made to a pension secured by private sector annuity rates. This is misleading because the state does not need to operate in the same way as a private insurance company.
This means administrative costs are lower, there is no need to factor in a margin for profit, and by definition the Teachers’ Pensions Scheme contains long and short-lived people.
Of course, right-wing public sector bashing and fiddling of the figures is nothing new, as regular readers will be aware of.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by becoming a Left Foot Forward Supporter today.