They are also promising “substantial” improvements in the service to members of the Teachers’ Superannuation Scheme, which is run by the TPA from its headquarters in Darlington, should they win the contract.

Education minister Robin Squire told the House of Commons last week in a written answer to a question from Sebastian Coe, MP for Falmouth and Camborne, that six companies were being asked to tender for the contract to administer the TSS, after “expressions of interest” were invited back in June. The TSS handles the pension arrangements of more than a million serving and retired teachers.

The six companies on the short list are Abbey National Benefit Consultants; Capita; Colonial; CSL; Hartshead Solway; and ITnet. They are now due to visit TPA headquarters at Mowden Hall, Darlington, to assess the organisation’s operations and enable them to draw up final tenders. Insiders say the Department for Education and Employment wants whoever wins the contract to start by October next year.

Mr Squire said in his statement that the shortlisted firms had declared they would administer the TSS for a lower cost than at present, and with a level of service that was at least as high as the TPA provides. All six have said they will keep data on members of the scheme confidential.

But teachers’ unions, civil service unions and the Labour party are furious that Education and Employment Secretary Gillian Shephard looks to be going ahead with privatising the running of the TPA despite widespread opposition to the idea, and have said that the announcement of the short list represents “the triumph of dogma over common sense”.

They say that when the Government asked for responses to the possibility of contracting out the TPA administration, 128 out of 131 organisations who replied said they opposed the idea.

All six teachers’ unions wrote to their members asking them to write to their MPs in protest. Brian Clegg, assistant general secretary at the National Association of Schoolmasters Union of Women Teachers, said: “It’s infuriating that Gillian Shephard is proposing this, after so many organisations expressed their opposition.”

And a National Union of Teachers’ spokeswoman said: “The TPA has met all its efficiency targets, and if the Government had only spent money buying it new equipment it would be even more efficient. Obviously we have concerns about the confidentiality of the TPA’s data, though one hopes the Data Protection Act and other safeguards in any contract to run the TPA will ensure there is no abuse.

“But our main concern is on the grounds of efficiency and cost. A privatised service will have to make a profit, and this will impact on the service teachers get and is likely to be reflected in the pensions they get in the future.”

The Labour party’s shadow minister for schools, Peter Kilfoyle, said: “We believe the Government’s statement does nothing to remove the very real fears of serving and retired teachers. The Government has vindictively excluded the possibility of any in-house bid, despite the proven efficiency of the TPA. ”

Alan Churchard, deputy general secretary of the Civil and Public Servants Association, one of two unions representing the 400 TPA employees at Darlington, said the announcement by Mr Squire was “terrible news for teachers and for staff at the TPA. It is a triumph for dogma over common sense.”

At the TPA, a union spokesman said staff were “very disappointed” the Government had ignored opposition to the privatisation, but were now intent on getting the best deal possible. The workers are hoping for a meeting with Mrs Shephard or Mr Squire to find out more about some of the promises made in the minister’s statement last week, including the declaration that “core” administration of the TPA would stay at Darlington and that new business might be introduced.

The six companies on the tender short list are mostly involved in administration “outsourcing”, where an outside company takes over the running of areas not seen as “core” to an organisation’s functions. All are likely to be looking to update the TPA’s record-keeping, which still relies on paper files. At one of the shortlisted companies, Colonial, the company’s UK general manager, Rob Garnsworthy, said: “I have no doubt at all that with the right investment, teachers will see a substantial rise in service standards after 18 months to three years, particularly in responsiveness. There’s a huge amount of paper-handling at the TPA at present, and that’s not good for 1995.”

Companies invited to tender

Abbey National Benefit Consultants, previously Guinness Mahon Consultants, was bought by Abbey National just over a year ago. It has 150 corporate clients, including Citibank, Toyota UK and the Independent newspaper, and is one of the largest companies giving advice on self-administered pension schemes for small businesspeople.

* Capita has just won the contract to run the Government’s pilot nursery voucher scheme. The group provides administration, payroll and council tax services for more than 1,000 clients.

* ITnet is a subsidiary of Cadbury Schweppes and runs financial services and information technology for clients including Glaxo, Tarmac, Hertfordshire County Council, Birmingham City Council and the London boroughs of Brent, Bexley, and Kensington and Chelsea.

* Hartshead Solway, based in Yorkshire, is the former pensions wing of the pre-privatisation water boards. It has recently won the contract to collect the money for the Teachers’ Superannuation Scheme from local authorities.

* Colonial, formerly Colonial Mutual, is the largest pensions administrator in Australia and New Zealand. It supplies financial advice to members of the National Association of Schoolmasters Union of Women Teachers.

* CSL is the managed services division of accountancy company Touche Ross, and runs servicing for among others, Berkshire Country Council and the London Borough of Croydon.