Young teachers opting out of pensions as cost of living bites

The Teachers’ Pension Scheme's annual report and accounts for the year ending March 31 2018, first reported by sister title FT Adviser, showed that 5,629 people opted out of the scheme from a total active membership of 667,809. In comparison, there were 3,669 opt outs in 2011-12.

The general secretary of the National Association of Schoolmasters Union of Women Teachers, Chris Keates, said: “25 to 39-year-olds are the most likely people to opt out, with the highest rates between the ages of 25 and 29”. 

She said that geographically, "opt-outs from the teachers’ pension, are very heavily focused on London", adding that the main reasons for leaving the scheme most typically given are the cost of living and the affordability of housing while paying pension contributions.

Testimony given by NASUWT and cited in the School Teachers’ Review Body 29th report, published this month, stated that “financial hardship was leading to an increasing number of opt-outs, particularly by younger teachers and teachers early in their careers”.

The National Education Union also asserted in the report that problems with starting pay were being compounded by very high marginal earnings reductions experienced by newly qualified teachers (ie tax, national insurance contributions, student loan and pensions), which amounted to almost 50p in each extra pound.

It also noted the impact of increased pension contributions, with higher contribution rates for teachers earning more than £43,182.

But the report stated that officials from the Department for Education said the number of teachers opting out of the pension scheme represented a small proportion of the overall workforce, and that increases in opt-outs were mainly driven by auto-enrolment.

For example, teachers who had previously opted out would be re-enrolled after three years if they moved schools or if their school converted into an academy. They would then have to opt out again.