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Part-timers on less than £15,000 'will pay higher pension contributions'

By Richard Johnstone | 18 November 2011

The Trades Union Congress has accused the government of misleading low-paid public sector workers on the impact of the planned pension contribution hikes.

In a report issued ahead of co-ordinated strike action planned for November 30, the TUC said a Treasury assurance that those earning less than £15,000 would be exempt from the increases was incorrect.

It warned today that 806,000 public sector part-time workers earning below this amount will have to pay higher contributions.

This is because the government calculates whether a worker is exempt from the increase based on their full-time equivalent pay, not their actual pay. Therefore, someone working half-time and earning £14,000 a year is considered to be earning £28,000 for the purpose of deciding contributions, and would have to pay more.

The proposed increases have been set out for local government and other public sector schemes, starting from next April. Council workers will pay on average 1.5% more of their salary, while those in teaching, NHS and civil service pension schemes will pay 3.2% extra.

Only around 1 million workers will have earnings low enough to avoid paying more, the TUC said.

General secretary Brendan Barber accused the government of ‘giving false hope to hundreds of thousands of low-paid public sector workers’.

He added: ‘Ministers have made much of their plans to protect the low paid. But there is a big catch in their small print, as hundreds of thousands – nearly all women – earning less than £15,000 will face a steep rise in contributions.

‘Yet the government only uses this loophole where it suits it. If you apply for tax credits the government measures what you earn, not what you might earn if you worked full-time.’

However, a Treasury spokeswoman called the TUC accusations ‘nonsense’, saying that the full-time equivalent is used to calculate current pension benefits.

She added: ‘The government has always been clear that it will protect those earning less than £15,000 on a full-time equivalent basis. These people will not see any increase at all in their contributions, while a further million earning up to £21,000 (FTE) will have their increase capped at 1.5 percentage points.

‘If you were to do it the other way you could be in the situation where someone earning £100,000 on an FTE basis, but just working a few hours a week would pay no extra contributions, whilst someone earning just over £15,000 and working full time would have to.’

The research is published on the day that the National Association of Schoolmasters/Union of Women Teachers announced its members had voted to join the November 30 walkout against the coalition’s pension reforms.

The NASUWT said that 82% of its members voted for the strike in the union’s first national ballot for over a decade. Turnout was 40%.

It is the latest teaching union to back the action, joining the National Union of Teachers, the Association of Teachers and Lecturers and the National Association of Head Teachers.

The strike could involve as many as 28 unions. GMB and Unite also voted in favour this week.



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