Is it bad for your wealth?

Early retirement and winding down are now available in Scotland. But will teachers be rushing to leave if the financial penalties are too high? Martin Whittaker reports

Teachers returning for the new school year in Scotland have been greeted with the latest instalment in the McCrone pay and conditions package: changes to the pension regulations quietly came into effect on July 1, offering older teachers opportunities to take voluntary early retirement or to phase in their retirement gradually.

The new measures have had much less fanfare than the McCrone pay rises and the 35-hour week. The aim is to give an escape route to those who may find the autumn years of their career too stressful, at the same time creating vacancies for more probationary teachers.

The changes come in two parts. The first is the introduction of the actuarially reduced pension (ARP) - giving older staff an option which has been available to teachers in England and Wales for the past two years. Those between 55 and 59 can retire but with reduced benefits. Both the pension and lump sum will be subject to a reduction calculated according to your age: roughly 5 per cent for each year; slightly less for the lump sum.

But the Scottish Executive stresses that staff should seek independent financial advice. "Members considering ARPI should be aware that, although the pension will attract index-linking, the effect of the actuarial reduction is permanent."

The second change is the winding down scheme, which allows those approaching retirement the chance to carry on part time, while still protecting their final pension. You must be at least 56 and have had a teaching contract for 25 years, 10 of which should have been full-time.

There is no comparable scheme south of the border despite calls for such by the teacher unions. There is an alternative to actuarially-reduced benefits called step-down provisions, which allow someone to move to a post of lesser responsibility and coast down to retirement without it affecting their pension. "It is an alternative strategy that could work and that people are using," says the NASUWT, the second biggest English teaching union.

It will be up to the Scottish education authorities, as the employers, to determine how the winding down scheme is used. They will have some control over the timing of early retirement - they cannot refuse your request but they can defer it for six months.

But how will the new measures be received? The Scottish Executive says it is difficult to forecast: figures are likely to vary by authority.

"We would expect a gradual take-up: some teachers will hold back their applications to let others test out the benefits and appropriateness of the scheme," says a spokesman.

City of Edinburgh Council has had enquiries about winding down. But a spokeswoman said: "We don't expect there will be much take-up for the actuarially reduced pension as it may not be an affordable option."

Fife has already been operating its own early retirement scheme. Each October the authority issues a circular asking who is interested, and applies a number of criteria, relating both to the teacher's age and length of service (and sometimes personal circumstances), as well as the effects of a retirement on school staffing.

"At the moment we're looking at projected falling rolls in the primary sector, so we've used the premature retirement scheme as one method of trying to keep the workforce balanced," says Alex McKay, head of education in Fife.

"I think a number of staff feel that by the time they're in their mid to late fifties the job's not getting any easier - it is very demanding. And some of them feel perhaps they don't have the energy for the full-time commitment, whereas winding down might be an option for them."

He believes there is unlikely to be an early response to the new measures in Fife. "If you look at winding down, they've got to be aged 56 years or more and have a minimum of 25 years service. But there won't be that many who are."

Mr McKay believes early retirement could become a headache for authorities because it allows staff to choose when they go.

"The teacher is very much in the driving seat, which potentially could cause some difficulty. Somebody might apply in September and you say: 'Well, it isn't a good time to go just now for the school to get a replacement.' If they come back six months later you have to let them go. Obviously the best time to make these kind of changes is at the end of a school session."

McCrone - seen as a fresh start for education in Scotland - has been generally embraced by the unions, but the early-retirement provisions have been greeted more coolly.

"I don't think there's going to be a massive interest in it," says David Eaglesham, general secretary of the Scottish Secondary Teachers'

Association, Scotland's second biggest education union. "Our view of the actuarially reduced pension is it's a very bad thing - seriously injurious to people's wealth. You'll have a 20-25 per cent reduction in your pension in perpetuity for five years early retirement. People who expect to live until 85 or 90 are going to look very severely at that.

"And the winding down scheme is only going to suit those who can effectively go down to half an income. It is a good deal for anyone who's set themselves up financially so that for example, the mortgage is paid off and the kids are all through university."

Another potential pitfall, Mr Eaglesham says, is where you might be told to spend your last few years. Part time work depends on the authority finding you a suitable post.

"You don't know what the job's going to be. Say I'm in a really good school, everything going comfortably and then I volunteer for winding down. Suddenly I find myself in the worst school in Aberdeen for the last four years of my career. Do I really want that kind of hassle? So there are some hurdles to be crossed there."

Log in or register for FREE to continue reading.

It only takes a moment and you'll get access to more news, plus courses, jobs and teaching resources tailored to you