A London IFA said teachers should not complain about being asked to make additional contributions to protect their retirement needs since they receive generous pensions after retirement.
Senior adviser for Bestinvest, Adrian Lowcock said given the generous terms teachers get for their pension packages, it was “difficult to empathise” with them, particularly when many in the private sector have suffered pay and benefits cuts.
“The teacher’s pension is a final salary and accrues at one-eightieth of their final salary. This means a teacher who has worked for 40 years and earned £50,000 at the end of his career would receive a tax-free lump-sum of £75,000 and an annual salary of £25,000, which is protected from inflation”, he explained.
“To get the equivalent pension in the private sector you would need a pension pot of £800,000. When the average pension pot is closer to £30,000, the deal teachers have seems pretty good”, he reasoned.
The government has proposed teachers should pay 10 percent of their salary from the current 6.4 percent. To put things in perspective, if a private sector employee made £50,000 and contributed 10 percent of her salary, the pension pot size will be £400,000 with a payout of £16,280 in today’s terms.
“The reasons for the changes are not down to austerity cuts themselves, but the realisation that we are living much longer than when these schemes were first set up. As such, the generous terms are no longer affordable. To work for 40 years and then expect to be retired for another 30 and receive a reasonable income is unrealistic. We should all take more control of our retirement planning”, said Lowcock.