The kicking the can down the road policy. It’s not just the US. Here in the UK, teachers have paid into the “teachers pension scheme” for decades. The money was never invested, it was spent alongside general taxation with the “promise to pay” being kicked down the road to future governments. As a result pensions which are paid come from taxation and non-teacher taxpayers are unhappy about that. No pension “pot” was created. If it had, it would be worth a fortune.
Even though the amount paid in is more than that which has been paid out even BEFORE any potential investment growth is considered, the system was predicted to fail. The failure is being caused by the failure to plan and the way the scheme over-rewarded those who were promoted late in their career. It’s not because they’re living longer because the teacher’s life expectancy hasn’t changed so much – it’s not as hazardous an occupation as coal-mining.
The “correction” to this has been to move the teachers pension age up seven to eight years, double their contributions and to reduce the pension income they get. The original scheme was considered sustainable for most teachers but removal of the pay cap for senior teachers led to their final salary pensions making the scheme unstable. (Hutton Report) The pay cap was lifted to encourage private investors to become involved in state education. We now have non-teaching multi-Academy “CEOs” on huge salaries.
The “correction” exempted most of those higher earning people from the new scheme and dumped the new costs back down the chain to the lowest earning and younger teachers.
As a result the average pension paid out from the Teachers Pension Scheme in the UK is around £8000. (Slightly different for men and women. Men tend to have worked more years)
The pension my old headteacher will receive is £52,000.
It is the £52,000 that gets quoted when critics attack the teacher’s scheme. There have already been two rounds of changes in the last 15 years to cut the payments. If new teachers choose not to contribute (it’s not compulsory), the system will collapse. Many private schools have already taken their teachers out of the scheme, using their own schemes instead. This can be cheaper for the school and more beneficial for the teacher.
Yeah, go after those greedy public schoolteachers instead of tax-dodging billionaires. They get summers off!
Need to change title to 2018. This is a reup
It’s a much better idea to have pensions funded by investments in companies than by pay-as-you-go systems, since those will be so dependent on future tax income, which will be affected by many things.