Wednesday, 10 November 2010

Public schools and Teachers Pension Scheme

 Have been extremely busy over the weekend and the last few days, attending the Green Left general meeting on Saturday and taking the minutes, and am also back this week on the independent brokerage course. So I did not get time to link to the article below which appeared in the Guardian on Saturday, where London Green Party Chair, Noel Lynch, is quoted. I am also preparing for a tribunal taking place tonight in my local party, Lambeth, regarding a complaint I am bringing about another member's conduct and had to spend half of Monday writing out my statement. In the interim, there has been more grim news from Ireland, with predictions that the economy there is heading for bankruptcy - falls in the Euro yesterday suggested major concerns with the Portugese and Irish economies.

Link to the article in  Guardian newspaper:

[3] Analysis of the FOI response by the London Federation of Green Parties:

The response names all the public schools that are admitted the Teachers' Pension Scheme.

Admittance to this scheme is important because employers participating in this scheme are only charged 14.1%(1) of pay for providing these final salary benefits. However this low employer contribution is only possible because of factors such as (a) the government's strong credit rating and (b) Treasury assumptions underpinning the calculation of the contribution rate. Schools would not be allowed by the Pension Regulator to make similarly optimistic assumptions if they ran their own pension scheme. Independent analysis suggests that the "true" contribution rate should be 10% higher to reflect these factors (2). While the Green party would not accept this analysis fully (because it is a partisan attempt to make public sector pensions seem unaffordable) it is certainly the case that, as private institutions, schools such as Eton and Harrow would have to contribute at least 20% of pay for the same benefits provided by the Teachers' Pension Scheme.

The value of this subsidy is considerable.

The 11 named institutions in the FOI response (including the schools attended by the Prime Minister, Chancellor, Deputy Prime Minister and Energy Secretary) have 1,639 members of staff in the scheme (Eton, for example, has about 150 full time teaching staff - information from its website). At an average subsidy of 6% of pay and assuming average pay in these institutions of £45,000 (a rather conservative assumption) then the subsidy to just these 11 institutions every year is almost £4.5 million (£400,000+ per annum for an institution like Eton). The top 100 schools are looking at over £40 million in subsidy per annum (a FOI could back that up if necessary).

On top of this, the risk and expense of running a pension scheme of this nature has been taken out of the hands of these institutions. Similar sized organisations are having great difficulty managing the investment risk associated with such schemes as stock markets fluctuate. These schools are given an exemption from these risks by the government for free. Likewise the schools don’t have to go to the expense of funding trustee bodies to run the schemes or appointing actuaries or lawyers to advise on them. Similarly there is no pension protection fund levy where otherwise there would be one.

These factors greatly increase the hidden subsidy.

Finally being able to offer the same pension provision that the state offers makes it easier for these schools to attract top performing staff from the state sector.

(1) see:

(2) see: (page 8)


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