The Department for Education has published the outcome of the consultation for members' contributions to the Teachers' Pension Scheme (TPS) in financial year 2012-13.
This is the first year of savings, which are being phased-in over a three-year period.
The TPS next year will retain the existing index-linked, defined benefit scheme, with significant annual employer contributions worth 14.1% of salaries.
But next year's scheme will see the majority of TPS members asked to contribute more. These changes are part of the Government's long-term reforms to control the increased costs of people living longer and re-balance the contributions paid by scheme members and taxpayers, while ensuring public service pensions remain among the very best available.
The changes, which will save £314 million from the TPS next year (2012-13), are part of the wider £2.8 billion savings from public sector pensions by 2014-15 which the Chancellor announced in the Spending Review 2010 - an average contribution rise of 3.2 percentage points (ppts) by that date.
Under the changes, new and lower paid teachers will be protected from the biggest contribution rises with higher earners contributing more - Lord Hutton's independent review of pensions set out a clear rationale for contribution increases.
To date, all employees pay exactly the same proportion of their salary into the Teachers' Pension Scheme regardless of salary.
But Hutton showed that in a final salary scheme, higher earners get a much higher return on their pension contributions; that on average they live longer so benefit from pensions for a longer period; and that lower earners are less likely to join pension schemes so need greater incentive to participate.
Next year will see 116,000 teachers earning between £15,000 and £25,999 on a full time basis contributing 0.6 ppts more of their salary into the pension scheme. It means a classroom teacher earning £25,700 will pay around an additional £10 per month after tax relief.
A further 117,000 teachers earning between £26,000 and £31,999 on a full time basis will contribute 0.9 ppts more of their salary into the pension scheme. It means a classroom teacher earning £29,240 will pay around an additional £18 per month after tax relief.
And 505,400 members or around three-quarters of the TPS membership earning under £39,999 on a full time basis will pay up to 1.2 ppts more of their salary into the scheme.
The highest earners, those earning more than £112,000 on a full time basis, will pay an additional 2.4 ppts.
The proposed contribution increases for members of the TPS in 2012-13 are approximately the same amount that were set out in the Pre-Budget Report 2009 to be delivered under the 'cap and share' arrangements, which were agreed with unions as part of changes to the scheme in 2007.
Schools minister Nick Gibb said: "Lord Hutton was clear that overall there needed to be a much fairer balance between the amount employees and the taxpayers contribute. And he was unambiguous that higher earners should contribute more to their pensions than the lower paid.
"Our changes for next year are about keeping pensions affordable for future generations of teachers - while protecting new and low income staff from the biggest contribution increases over the next few years.
"Looking at longer-term pension reforms, we've been clear that teachers will still have one of the very best pensions available - with index-linked, defined benefits; significant employer contributions; protection for those closest to retirement; and all accrued final salary rights protected.
"Reforms to public sector pensions are necessary. The overall cost of public sector pensions has risen by a third to £32billion in the last decade. The cost to the taxpayer of teacher pensions is already forecast to double from £5billion in 2006 to £10billion in 2016 and will carry on rising rapidly as life expectancy continues to improve. ??"We've listened carefully to teachers and heads. We've put forward an improved offer on the table and our discussions are continuing."
The announcement follows a detailed public consultation over the summer. Contribution changes for 2013-14 and 2014-15 form part of the ongoing discussions with unions about long-term reform of the Teacher Pension Scheme.
