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Government Plans to Privatize Teachers' Pension Scheme and Contract Out Civil Service Scheme

Strategic Insights

— 1 min read

The Department for Education is poised to put the Teachers' Pension Scheme, which covers over 1.1 million teachers, out to tender to the private sector. This move, revealed in documents seen by The Sunday Times, could mark a significant shift in the management of occupational pension schemes in the UK. The scheme's administration, currently handled by the Teachers' Pensions Agency, would be handed over to a private company, potentially leading to cost reductions and improvements in service quality. The move follows a review by accountants KPMG Peat Marwick, which concluded that the scheme's administration should be contracted out to the private sector.

Key Takeaways:

  • The Teachers' Pension Scheme, which has an annual turnover of £4 billion, is set to be privatized, with the Department for Education seeking a private company to administer the scheme.
  • The scheme's current administrator, the Teachers' Pensions Agency, employs a staff of 350 and has over 1.1 million members.
  • A KPMG review recommended that the scheme's administration be contracted out to the private sector to achieve "substantial cost reductions and improvements in service quality".
  • The earliest feasible date for implementation is April 1996, subject to consultation and approval.
  • Opposition to the plan has been fierce, with unions expressing concerns over potential cost increases and the exploitation of the pension agency's database for marketing purposes.
  • Barry Fawcett, head of pensions at the National Union of Teachers, has described the proposals as "wholly opposed" and a threat to the standards of service members receive.

Statistics:

  • The Teachers' Pension Scheme has over 1.1 million members.
  • The scheme's annual turnover is £4 billion.
  • The Teachers' Pensions Agency employs a staff of 350.
  • The proposed privatization of the scheme represents the biggest shake-up in the UK's pension market since the introduction of personal pensions in 1988.
  • The Principal Civil Service Pension Scheme, which covers 524,000 civil servants, is also under review, with ministers working towards contracting out its administration to the private sector.

Sources:

  • The Sunday Times, 1995
  • KPMG Peat Marwick report
  • Teachers' Pensions Agency documents
  • Council of Civil Service Unions
  • National Union of Civil and Public Servants
  • National Union of Teachers
  • Gillian Shephard, Education Secretary

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