The latest report by the Education Policy Institute (EPI), explores whether providing more flexibility over teachers’ pensions and remuneration could support improved recruitment and retention in the profession. EPI collaborated with Teacher Tapp to survey nearly 6,000 teachers to find out what they want from their compensation package and how valuable the current Teachers Pension Scheme is to them.
The report finds that:
- Teachers prioritise immediate salary increases over retirement benefits. Teachers value a 10% increase in their retirement income only as much as a 6% increase in their current salary.
- A sizeable proportion of teachers would prefer more flexibility in their pension plans, with 15% of teachers willing to trade 20% of their pension income for a 10% salary increase. Currently, all teachers in state-funded schools are automatically enrolled in the Teachers’ Pension Scheme (TPS), with average contributions of 9.6% of their salary. However, the scheme lacks flexibility as teachers cannot choose their contribution rate or adjust it to suit their financial needs.
- Younger teachers, particularly those in their twenties, are two-thirds more likely to trade pension for salary than teachers in their fifties. Almost 1 in 5 teachers in their twenties would prefer a compensation package with a 10% salary increase, even if it meant switching to a DC pension and losing 20% of their retirement income.
- Teachers who are financially struggling are a quarter more likely to want to trade pension entitlement for salary than teachers who are financially comfortably
- Teachers strongly prefer a guaranteed retirement income over income dependent on stock market performance. Our analysis finds that teachers are 22% less likely to choose a pay package tied to stock market performance over one that guarantees their retirement income. In fact, they are willing to give up 10% of their salary to keep that retirement security.
The report recommends that the government should:
- Permit schools to offer pension options: A substantial minority of teachers prefer to trade some retirement income for current salary, which is not currently possible within the TPS. Schools should be allowed to offer alternative arrangements to their staff, alongside the TPS, should they wish.
- Investigate the possibility of providing flexibility within TPS: The government should review the TPS with recruitment and retention in mind. It may be that, as with schemes such as the civil service pension scheme, there is room to offer more flexibility within the TPS and make teaching a more attractive profession to more people.
- Conduct research on policy options: Research should be conducted into the likely impact and consequences of various policy options, with the goal of offering a set of schemes that promote recruitment and retention, while still ensuring retirement security for teachers.
You can download and read the full report here.
This research was kindly funded by Lord Nash, Lord Fink and Barnett Waddingham.
Barnett Waddingham is a leading independent UK professional services consultancy across risk, pensions, investment and insurance.
