From the TUC

Low-paid women miss out on pensions ‘promise’

18 Nov 2011, by in Pensions & Investment

The TUC published analysis today that shows more than 800,000 low paid public sector workers – 9 out of ten of them women – could lose out despite a government commitment to protect low earners from pension contribution increases.

The government is seeking an additional £2.8bn a year in contributions from members of public service pension schemes by 2014-15, phased in over the next three years. This is an average of 3.2% of pay, roughly a 50% increase on the contributions currently paid by many in the schemes (find more on our pensions justice site).  

The Treasury has said that those public service workers who earn less than £15,000 will not face any increase in the contribution rates they pay. But there is a very important caveat in that promise, which is that this is based on FTE: full time equivalent earnings.

For example, if an experienced nurse or teacher has an FTE salary of £28,000, but they work half-time and so their actual pay is around £14,000, they will be classed as earning £28,000 for the purposes of calculating their pension contributions.

The TUC’s figures show that 806,000 people are caught out in this way – 12.5% of public sector employees. And it is low-paid women who are overwhelmingly the ones affected, making up 90%, (732,000) of those caught in the trap. About one in six (15.8%) of public service workers have FTE earnings below £15,000 and so will escape the increase.

Women, who make up two-thirds of the public sector workforce, are already particularly hard-hit by the public sector pension changes. This false promise lets down hundreds of thousands more.