Proposed changes to the teachers' pension scheme to force employers to pay a share of the costs of early retirement for the first time are expected to cause devastation to restructuring plans.
The changes, set to operate from next April, are the second pension blow to colleges in a year. Many already face dire problems as a result of a sharp rise in employer contributions to the Local Government Superannuation Scheme, which runs the pensions of most college support staff.
That increase, imposed from last April with just six weeks' notice, has angered colleges which have no say in any changes. Some believe they are subsidising swathes of early retirements made by local authorities or other colleges.
The Government has moved to tighten up premature retirement arrangements for teachers and lecturers in an attempt to stem a rising tide of staff opting to go early. The trend is both creating a shortage of experienced teachers and draining the pension scheme.
Under the proposed changes to the fund, employers - including colleges and local education authorities - will have to pay a share of the cost of staff retiring early. Previously, the pension fund picked up the bill.
In another change, employers' contributions to the pensions scheme will be reduced by 0.85 per cent to 7.2 per cent of salary. The Department for Education and Employment argues the shake-up will create net savings for colleges, but managers disagree.
The Association of Colleges warns the changes could cause severe problems for colleges, forcing them to keep older staff until retirement age and resort to redundancies among those under 50 when they need to restructure.
The axeing last August of the restructuring fund - a Further Education Funding Council pot designed to help out with the immediate costs of redundancies - makes the situation doubly difficult for colleges. However, FEFC chief executive David Melville is understood to have pledged to bring back the fund when cash is available.
The AOC, which is surveying colleges over the proposed teachers' pension fund changes, also announced plans this week to lobby the Departments for Education and Employment and Environment over the changes affecting support staff pensions.
From last April, colleges have had to pay increased contributions into the Local Government Superannuation Scheme, and are also having to meet the costs of any support staff retiring early.
The scale of the increase being demanded of colleges varies around the sector because the scheme is administered by individual local authorities. In each case, colleges are forced to accept the rise, though they are furious they have no say over how it is reached.
Braintree College, Essex, whose contributions to the scheme have risen from 8.1 per cent to 11.5 per cent of salaries this year, is among many believing it is being penalised. Principal Martin Bates said: "We were at the mercy of the trustees and we had no voice."
The college had been prudent over early retirement packages but believed it was having to subsidise more generous deals offered by the council and other colleges, he said. Braintree is pressing to have its contributions to the scheme reviewed and set independently of other contributors.
The changes had made early retirement for support staff prohibitively expensive, and changes to the teachers' pensions fund would have the same effect for lecturers, Mr Bates said. Colleges might ultimately have to contract out all staffing except for a small core of managers because of high pensions costs, he suggested.
The AOC points out that colleges have been left to find the cash to meet the pensions changes with no extra support in their FEFC grant. Deputy chief executive Sue Dutton said: "This is causing colleges severe financial strain which they could not have planned for."