Teachers Pension Scheme Reforms in the UK - Case Study Example

Teacher’s Pension Scheme reforms in the UK The Teachers Pension Scheme (TPS) of UK is a final salary occupational pensionscheme of the public service, and it is unfunded. It is regulated by the Superannuation Act 1972, which has rules and regulations that provide a legislative framework for the scheme, and most notably Teachers Pension Regulations 2010 (SI2010/990). Changes were introduced to the scheme in 2007, and these affected new entrants too. However, these changes have grown into a contentious issue with different sides holding different opinions about the reforms. This paper explores the ongoing negotiations between government ministers and union chiefs regarding the reform by focusing on the issues at stake, and tactics employed to have a glimpse of the situation in the long run. Issues involved in the scheme The TPS of UK currently assumes a defined benefit scheme of 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 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 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 take 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 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 earning s 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 on 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. Additionally, is the government decision to raise the retirement age to be in correspondence to that of the state pension age was to have the teachers contribute a lot more than the previous years to the pension scheme? This was under the disguise of creating uniformity of the public service where all the public servants have a retirement age. To make matters worse, they also employed the tactic of reducing the pension incase the teacher retires earlier than the recommended age so that the deduction could account for the remaining years a teacher was to serve. This was put forward in a manner to tap the contributions of teachers even more than when teachers retire at 55 years. However, the union chiefs dismiss this on the grounds of a tiring profession that should not expect teachers to be active at the age of 68. If this is considered, then it is likely that the teacher’s retirement and pension age will not go up. This will be, in addition to, teachers’ interests that there was continued dominance over their pensions by seeking to remain with the old system. The effectiveness of the negotiations is low, and this is because of the significant information from both sides that are out in the light. However, the side of union chiefs stands a better chance because, if it worsens and the government does not to come to the drawing table, the strike is imminent. It is noteworthy that no government will exist without teachers in place taking their rightful position for this will mean wasting minds of the people. Therefore, the union side is on the advantageous position, which, even though, it is not a better option than negotiation, it is equally noteworthy because it may get the government side on the drawing board. Given the fact that teachers already know what the government’s goal is, they will be capable of exploiting it in the end, this is sure to have an effect on the government’s side, which has tried to make offers that are sure to cost them. This is due to the assertion that “The first offer can become a strong psychological anchor point, one that sets the bargaining range” (Negotiation 4). The power of the negotiating parties At the start, of the negotiation, one of the powers held by the government was the constitution which was provided for by the superannuation Act 1972 under the constitution and functions of the board (Education Department 1). It is because of the issues of reform that the government reformed the constitution so as to have the teachers contribute more to the scheme as a means of ensuring saves accrue. This was the Superannuation Act 1972 that amended the 1972 act to disallow the requirements of agreement from the unions when making amendments. This nature of power was constitutionally guarded, and it was forthcoming for the government. For a country ruled b y law and order, it is essential that the rules be followed to the latter otherwise it would be the infringement of common people’s rights. Therefore, the government had an upper hand in the matter, for its decision was well guarded. Another power held by the government was the fact that other trade unions had agreed to it, and it was their turn to face change (Department of Education 1). Therefore, this nature of power was enough to disorient the chiefs of the teachers’ unions that would later enable teachers to play eventually to the tune of the government. This is because the constitution did not allow for exemptions or unique treatment of some unions over others. However, this power was weak in a way because, it loosely conformed to the Superannuation Act of 1972, which did not specify on the uniform application and of pension schemes contributions to the public service. The two powers, however, gave a bargaining power to the government ministers who were willing to ensure that they achieved some savings in the end by tampering with any rules in the name of reforms. On analysis, these powers were not real, for the powers emanated from the manipulation of the law just because the government ministers were the ones faced with the task of initiating, vetting and implementation of amendments in the constitution. This shows their bias in having the best at the expense of the citizens whom they should be representing. On the teacher’s side, one of the outstanding powers was the knowledge the teachers had of the government’s emphasis on subject. The government was doing this to increases savings in the public sector, and they had turned on the TPS as the scapegoat (Department of Education 1). This pinned down the government, for instead of the government looking for a way out that would be beneficial to everyone; it wanted to sacrifice the teacher’s pension scheme. This was uncalled because just like the government, the teachers were also required to save. This revelation resulted into coming up of many other powers of the teachers union that accentuated the controversy. It thus emerged that the teachers work was so involving, that at the advanced age of a teacher, it would be difficult for teachers to be productive enough. The vision of the country to have an improvement in the education sector, would, thus be affected by the new demands. It is this consideration that fueled the outcry from the public sector regarding the safety and efficacy of their children’s' education (Department of Education 1). However, it is worth noting that these powers held by the union chiefs were not legal other than social. This required that the public come to the rescue of the teachers’ pension scheme by getting involved in the issues facing teachers and calls for reconsideration. This seems that the two opposing powers were bestowed in the government and its people whose interests seemed to be conflicting. This debate has dragged on for as long one can remember, with the two sides having not reached a consensus. However, from the look of things the government seems to have sidelined the public by dismissing their concerns. This is due to their determination of saving at the expense of the teacher’s welfare as well as the education status of the nation. In as much as the government had a strong foundation from the provisions of the constitution, this received a big blow when the court ruled in favor of teachers. This was in regard to the provision of the 1972 Superannuation act that was established to confer protection to the Public and Commercial Services Union (PCS), an act that the government ministers had tried to manipulate to work to their advantage. This decision was a landmark in the struggle of teachers for protection of their pensions. This is because, the public now enjoyed the provisions of the constitution before the amendment, and for the government ministers had not followed the right procedures in amending the controversial Act (Department of Education, 1). From this discussion, it is noteworthy that as the government continued to lose grip of the constitution that they had used to compromise teachers’ pensions, the teachers began enjoying the support of the constitution. This presentation was, in addition to, the support they also received from the public and especially other trade unions (Department of Education 1). This is because; the ruling resulted into a nationwide strike in which the majority demonstrating were public servants. This was indeed a shift of power from the government side to the teacher’s side. With power having shifted to the teachers side and the continued determination of the government to initialize savings the negotiations are still own. This is because (McRae 13) asserts that value can only be created through careful listening to other persons needs as well as interests, for this goes a step ahead in helping the other person learn of these demands and interests. It is only after this step that the two can integrate and link their interests together. However, this has not been forthcoming in the UK TPS issue, which has seen the high handedness of the government try to impose the changes to the people. This has not resolved the problem, but just added to the conflicts with strikes being the evidence for this exuberant issue. Works cited Departmrent of Education. Proposed teachers Pension Scheme Reforms. 2012. Retrieved on 7TH May 2012 From < http://www.education.gov.uk/schools/careers/payandpensions/b00204965/proposed-teacher-pension-scheme-reforms> Harvard Business School. Negotiation. Harvard, Harvard Business Press, 2003. Print. Lewicki, Roy, Saunders, David. & Minton, John. Negotiation, New York: McGraw-Hill, 1999. Print. McRae, Brad. Negotiating and Influencing Skills: The Art of Creating and Claiming Value. London, SAGE, 1998. Print. Read More