How strike action can affect your pension

Strike action affects the length of service for all employees and the final salary for those in their last year of service.

LOSS OF SERVICE

This effect is likely to be very small. The pension is calculated as one-eightieth of final salary for each year of service. One day of strike results in a loss of:

FINAL SALARY/(80 x 365)

For a lecturer retiring at the top of the HE senior lecturer scale, on a salary of £37,643, the loss to the pension resulting from the loss of one day of service would be £3.00 per year. This would result in an annual loss of £1.12 if they had 30 years service.

For a lecturer on a final salary of £30606, the annual loss to the pension would be £2.44. This would result in an annual loss of 91.5p.

These examples assume the worst scenario, ie that employers refuse to waive the deduction of pay for strike action and there is no increase in final salary as a result of the strike.

FOR THOSE IN THEIR LAST YEAR

Branches can avoid additional costs to those in their last year of service by making sure that employers are aware of the distinction between the service salary and the contributory salary reported to Teachers Pensions.

The contributory salary is the salary on which the 6% contributions would be based. This has to be the actual salary for the year.

The service salary is the full-time equivalent salary for the whole year - it is the salary the full-time lecturer would have been paid if s/he had not been on strike. This figure should be shown on the teachers' service records sent to Teachers' Pensions. If this is done correctly, lecturers in their last year of service will not suffer greater losses than other lecturers.

Members should check their benefit statements in due course to ensure that the correct annual salary has been reported to TP. Employers do not have discretion in this matter so an appeal to Teachers Pensions can be made if employers do not report the correct service salary.

If branches and/or members do not succeed in having the correct salary reported to TP, there is a potential loss if there has been a pay award within the relevant period. If there has been no pay award in the last two years of service, there will be no loss.

Where there has been a pay award, the loss may be estimated as follows:

(i) where the employer deducts 1/365 of salary for the loss of a single day of strike action, the loss is very small. The pension is based on the last 365 days of pensionable service with one day from the previous year replacing the 'missing' strike day in the calculation.

(ii) where the employer deducts 1/260th of salary for the loss of a single day, the potential loss is larger as the average salary in the final year falls. Branches need to be particularly vigilant to ensure that institutions report the correct final service salaries in this situation.

Note The final salary is the salary for the best 365 consecutive days out of the last three years of employment. The size and timing of a pay award can therefore be significant for people within a year of retirement.