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Teachers Pension Scheme Reforms in the UK - Case Study Example

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The following cases study "Teachers Pension Scheme Reforms in the UK" dwells on the final salary occupational pension scheme of the public service. It is stated that the Pension Scheme is regulated by the Superannuation Act 1972, which has rules and regulations that provide a legislative framework…
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Teachers Pension Scheme Reforms in the UK
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Download file to see previous pages Issues involved in the Teachers Pension Scheme of the UK currently assume a defined benefit scheme of the final salary of teachers. This translates into the fact that retirement benefits, as well as the final salary of individual teachers, is based on the length a teacher has been in service. This has seen a calculation of final salary of retirement benefits based on either the best of a teacher’s salary within the twelve months before retirement or calculated as the best average of any three successive years of salary in the last ten years. However, the union chiefs have taken a stand to demand the reformation of the method that is being used in the calculation of the retirement benefits. The chiefs argue that this method of calculating final salary is unfair, for it only benefits high flyers at the expense of low flyers that are in the same professional groups. Conversely, the government is of the opinion that it is the way to go, and, therefore, rooting for the maintenance of the scheme only that the final salary be replaced by a revalued earning scheme that is career averaged (Lewicki et al, 56). Another issue is the retirement age where it has been noted that life expectancy of people in the UK is on the rise. This means that retiring at 60 results into teachers spending approximately 40% of their lives in retirement as compared to earlier years like 1955 when life expectancy was low (Department of Education, 1). Government ministers demand that the retirement age takes into account the increases in the life expectancy, in addition to, reformation of the normal pension age so that it corresponds with the state pension age. However, the union chiefs are opposed to the increase in the pension age to 65. In terms of contributions, the issue is the monthly contributions to teachers’ pensions. The government is of the view that the monthly contributions be increased and that the contribution levels be tied to the earnings to protect the low aid teachers. However, union chiefs are opposed to this, for this will only function to favor the employers who will have an upper hand in determining the teachers’ pensions. The final issue is the issue regarding returning to work after a teacher retires. The union chiefs root for abatement of teachers’ pension as the government root for a reduction of pension on return with an increase upon retirement. Tactics employed The government minister’s concern is the increasing cost of running the TPS which is purely unfunded. This means that the contributions paid by both employers and employees are the ones used to pay out pension benefits to teachers by the government department (Education Department, 1). Therefore, in a way of raising these funds as well as allowing for saving, the government figured out how they can have teachers themselves contribute to this plan. This was transferred to the monthly contributions teachers make to the TPS. It was, thus, consequential that teacher’s contributions be increased by an average of 3.2 percent that is from 6.4 percent to 9.6% by 2014. This may translate to a person earning forty thousand dollars seeing an increase of up to 64% in the monthly contributions (Lewicki et al, 1). However, this is under the disguise of contributions being dependent on the earnings where the highly paid would contribute more than the low paid. ...Download file to see next pagesRead More
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