Whereas state schools can grant early retirement, the costs of which are then picked up by the local education authority which can spread the financial burden, it is proposed that individual colleges will have to meet the costs in a single financial year. In a letter to David Melville, the Further Education Funding Council’s chief executive, four heads of Birmingham colleges state: “We cannot believe that the Secretary of State intends to discriminate against colleges in this way.” They recommend that the FEFC be made the compensating authority for colleges and be allocated adequate funds.

Eddie McIntyre of the Birmingham College of Food, Tourism and Creative Studies, who is one of four, explained: “If the FEFC pays then we will have to accept that our budgets will be cut, but it will work on the insurance principle, sometimes you will win, sometimes you will lose. At present I have 19 teachers over 50, many colleges will have a lot more. So in the first few years I will lose. But I have 40 teachers between the ages of 40 and 50 so in the long term it will even out.”

As things stand, no college, he says, will be able to offer early retirement from next April if the Government implements its plans.

The Birmingham College of Food, with Pounds 4 million teaching costs, will make an annual saving of Pounds 34,000 because of the reduction to employer’s pensions contributions - though the Government intends to retrieve some of this when setting grants to the Further Education Funding Council. However, the cost of retiring one 50-year-old female teacher earning Pounds 28,000 with 25 years’ service would be Pounds 89,780 - the lifetime cost of the early retirement - under the new proposals.

Mr McIntyre said: “All of that money has got to be put on to the books of the college in that year, so as not to mortgage the future. No college can live with that.”

NATFHE, the lecturers’ union, says it has been “inundated” with anxious callers, but unfortunately its chief pensions officer has been on annual leave. One college principal who wished not to be named said that he felt the pensions officer should have been recalled. “Here is something more fundamentally important even than the contracts issue,” said the principal, who has been a NATFHE member for 20 years. “As usual NATFHE seems to have got its priorities wrong.”

In their letter to David Melville, the Birmingham principals also highlight benefits to be gained from tackling “abuses” of ill-health retirement provision which they believe the Government has largely overlooked. “Since incorporation few colleges have been offering enhanced pensions and this has led to a flood of ill-health retirees,” they say. “The cost to the pension fund of these must be substantial as up to 10 years’ enhancement is granted. Ill-health retirement can cost up to four times as much as normal early retirement because of the relatively young age of the retiree and the comparatively generous enhancement. ”

As 25 per cent of all retirements are on the grounds of ill-health the way to cut the pensions bill was to “eradicate this abuse”.

Mr McIntyre said: “The majority of ill-health retirees seem to make a miraculous recovery the day they are granted their pension. These Government proposals are concentrating on the pension scheme as a whole rather than ill-health pension issues. They are using a sledgehammer to crack a nut. ”