Telegraph’s “£500,000 teachers’ pension pot” claim is wrong

The Daily Telegraph’s claim this morning that “a typical teacher can expect to retire with a taxpayer-funded scheme worth more than £500,000″ is misleading, miscalculated and ignorant of the facts.

Teachers-strike-30-06-11 The misleading half-a-million-pound “typical teacher” pension figure distorts the actual level of public sector pensions by focusing on one of the better paid groups of public sector workers and assumes 37 years’ service.

The paper assumes a pension of £24,000 – yet the average teachers’ pension in payment is £10,000, as shown in the scheme’s Resource Accounts. Furthermore, they assume a teacher who enters teaching at 23 and retires at 60 with a final salary of £32,000 will have a pension of £24,000.

That assumption is wrong, as the simple calculations below explain:

• A teacher who joined the scheme on or before December 31st 2006 gets 1/80th of their final salary per year of service plus three times this as tax free cash.

• Their pension at 60 is (£32,000)X(37/80) = £14,800, + £44,400 tax free cash.

• A teacher who joined the scheme on or after January 1st 2007 gets a higher accrual rate of 1/60th of their final salary per year of service, but this can only be taken in full at age 65; there is no automatic lump sum.

• The pension available at 60 – including the current actuarial reduction factor of 0.753 – is (£32,000)X(37/60)X(0.753) = £14,859.

• This is not a pension of £24,000.

The Telegraph article also ignores the fact that teachers’ pensions are funded on a different and more secure basis than pension backed by annuities – their comparison is made to a pension secured by private sector annuity rates. This is misleading because the state does not need to operate in the same way as a private insurance company.

This means administrative costs are lower, there is no need to factor in a margin for profit, and by definition the Teachers’ Pensions Scheme contains long and short-lived people.

Of course, right-wing public sector bashing and fiddling of the figures is nothing new, as regular readers will be aware of.

http://twitter.com/stuartalder/status/86427860679659520 Stuart Alder

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/sean_gittins/status/86428137075916800 Sean Gittins

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/martyj21/status/86428178855370753 Martin

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/aineaislingmam/status/86428213097664513 Caroline McAllister

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/frdragonspouse/status/86428461232693248 Jill Hayward

RT @leftfootfwd Telegraph's "£500,000 teachers' pension pot" claim is wro: http://bit.ly/kjuJ7p reports @ShamikDas #J30 >> Brilliant!
http://twitter.com/jamiesw/status/86428544791625728 JamieSW

RT @leftfootfwd Telegraph's "£500,000 teachers' pension pot" claim is wro: http://bit.ly/kjuJ7p reports @ShamikDas #J30 >> Brilliant!
http://twitter.com/robotlong/status/86428822743957504 Robert Long

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/davidamunday/status/86428959486644224 David Munday

RT @leftfootfwd Telegraph's "£500,000 teachers' pension pot" claim is wro: http://bit.ly/kjuJ7p reports @ShamikDas #J30 >> Brilliant!
http://twitter.com/dudefozz/status/86428986820919296 marc foster

Daily Mail (& govt) lies about teachers pensions exposed here http://bit.ly/jEZSkV @leftfootfwd and here http://bit.ly/mvav92 @ns_mehdihasan
http://twitter.com/robotlong/status/86429189024129024 Robert Long

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://t.co/zrx46P1 LIES, DAM LIES & THE TELEGRAPH!!
http://twitter.com/brumprotestor/status/86430332299120640 Brummie Protestor

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/thekrumlin/status/86430866938675200 TheKrumlin

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/danielelton/status/86431251619262465 Daniel Elton

RT @leftfootfwd: Telegraph's http://t.co/xpY3Ja9
http://twitter.com/danielelton/status/86431385916674048 Daniel Elton

RT @leftfootfwd: Telegraph's http://t.co/xpY3Ja9 #J30
http://twitter.com/andy_gilpin/status/86432443023900672 Andy Gilpin

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/amandakendal/status/86433999815319552 Amanda Kendal

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/david_christie/status/86435744775811072 David Christie

RT @leftfootfwd Telegraph's "£500,000 teachers' pension pot" claim is wro: http://bit.ly/kjuJ7p reports @ShamikDas #J30 >> Brilliant!
http://twitter.com/deardaveandnick/status/86436167653933056 Bern O’Donoghue

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/drneevil/status/86436556134555648 Niamh Foley

Daily Mail (& govt) lies about teachers pensions exposed here http://bit.ly/jEZSkV @leftfootfwd and here http://bit.ly/mvav92 @ns_mehdihasan
http://twitter.com/andy_s_64/status/86438140063129600 Andy S

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/threadbarepanda/status/86439092702810112 Panda

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/chrisstagg/status/86441352765771777 Chris Stagg

RT @leftfootfwd Telegraph's "£500,000 teachers' pension pot" claim is wro: http://bit.ly/kjuJ7p reports @ShamikDas #J30 >> Brilliant!
http://twitter.com/mtancock/status/86445083272036353 Matt Tancock

Telegraph’s “£500,000 teachers’ pension pot” claim is wrong http://bit.ly/iSGXNE
Michael

Telegraph’s “£500,000 teachers’ pension pot” claim is wrong – http://tinyurl.com/69d5ogo
http://twitter.com/cutchswife/status/86452607119396864 cutchswife

Telegraph’s “£500,000 teachers’ pension pot” claim is wrong – http://tinyurl.com/69d5ogo
http://twitter.com/2ndalexhiggins/status/86494943794823168 Alex Higgins

The Telegraph's false claims, bogus calculations about teachers' "500K pension pot" http://t.co/sum4y2t #J30strike
http://twitter.com/pickledseal/status/86515441102630912 Andy Lewis

The Telegraph's false claims, bogus calculations about teachers' "500K pension pot" http://t.co/sum4y2t #J30strike
http://twitter.com/bardh_gwerin/status/86532206314520577 Tim Saunders

Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/dougrouxel/status/86539466143039488 DougRouxel

RT @leftfootfwd: Telegraph lies about size of teachers' pension pot http://t.co/ol4Vwgl #J30 #strike
http://twitter.com/brixtonite/status/86539688525045760 Brixtonite

RT @leftfootfwd: Telegraph lies about size of teachers' pension pot http://t.co/ol4Vwgl #J30 #strike
http://blah taxpayer

Some interesting maths you share. So as you say this is the State that funds this.

The BEST rate that a private sector person could get to provide a pension is around 35:1.

So you say that a teacher’s pension is more like £14,800 per annum, rather than that ridiculous £24,000 per annum. So someone in the private sector would need to save £14,800 x 35 = £518,000, plus the tax free lump sum, £44,400 = £562,400 to be able to replicate the pension from the Teachers’ Pension Scheme.

OK, let’s strip out profit then. Let’s give the insurance company a margin of 15% to cover profit and expenses (huge, but let’s give you that).

£14,800 x 30 = £444,000 plus your lump sum, £44,400 = £488,400, which is er, um, kinda, sorta very close to half a million pounds. What a disgrace for the Telegraph!

I’ve actually ignored discounting on the lump sum, but the point is that you are cooking your maths too.

I don’t begrudge teachers earning a decent wage and an adequate pension, but your skewed agenda doesn’t inform or help the debate. I have worked in this area my whole life and I believe that the country has a serious pensions problem.

The government has unfortunately not put conveyed the case for change succinctly, but blinkers will not cover sup the facts unfortunately.

Please – speak to your nearest pension actuary and get an independent view, and abandon defensive bunker-speak.

What does “the Teachers’ Pensions Scheme contains long and short-lived people” mean? Its no different
http://thenerdrageblog.wordpress.com/2011/07/01/links-for-2011-06-30/ links for 2011-06-30 « The NRB

[...] Telegraph's "£500,000 teachers' pension pot" claim is wrong | Left Foot Forward [...]
http://twitter.com/psbook/status/86718196710776832 Political Scrapbook

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/revpamsmith/status/86718854868385792 Pam Smith

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/eimaj1210/status/86718983067271168 .

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/jon_s/status/86719201506639872 Jon

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/deardaveandnick/status/86719262529556480 Bern O’Donoghue

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/pcsavage/status/86719312123011072 Peter Savage

Telegraph's claim of a £500,000 teachers' pension pot is wrong http://t.co/xkuvLg6 #pensions #strike
http://twitter.com/pcs_gonw_branch/status/86719708392460288 Rep in the Region

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/davidwhe/status/86719723957522433 David Whewell

Telegraph's £500,000 teachers' pension pot claim is wrong http://t.co/KMftymt
http://twitter.com/emptybelly/status/86719731847016448 Dave Roberts

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/lefty_lisa/status/86725366437257216 Lisa

RT @leftfootfwd: Telegraph's "£500,000 teachers' pension pot" claim is wrong: http://bit.ly/kjuJ7p reports @ShamikDas #J30 #J30strike
http://twitter.com/nemesisrepublic/status/86725513783156736 Nemesis Republic

RT @psbook: If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr
http://twitter.com/sanquirico/status/86727284630896640 Amangham

@NemesisRepublic This: http://t.co/mvTIaRV was something that WATB was lying about on #EDL yesterday.
http://twitter.com/tinnles/status/86727895732584448 Anne Peat

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/jamiebrown6/status/86728542347476992 Jamie Brown

“@psbook: The Telegraph's "£500,000 teacher pension pot" claim is wrong http://t.co/paCGkKY (@shamikdas)” < nice disclaimer about pre 2006
http://twitter.com/lenarthur2/status/86730517319389184 Len Arthur

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://twitter.com/bradnsj/status/86743422521712640 Neil Bradley

If you didn't see it yesterday >> The Telegraph's "£500,000 teacher pension pot" claim is wrong http://bit.ly/k4E7vr (from @shamikdas)
http://torylies.blogspot.com Richard Blogger

Can “taxpayer” explain to me why s/he has used the figure of 30 or 35years? Life expectancy for a woman is 85, so if she retires at 60 that is 25 years pension.

Why are you assuming that everyone will live to 100?