A consultation paper issued last week by the Scottish Office Pensions Agency wants the full costs of teachers retiring before 60 to be borne by their employer from next April, instead of being shared with the Scottish Teachers' Superannuation Scheme. Similar amendments are proposed for England and Wales.
The pension authorities have been forced to act following a highly critical report earlier this year from the National Audit Office. The report pointed to mounting "financial strains" on the superannuation scheme because of the rapid rise in the number of teachers retiring early. This has been "at significant cost to the pension scheme and to public expenditure", the pensions agency says.
Over the 10 years to 1994, the proportion of teachers staying on until age 60 has fallen from 56.7 per cent of retirements to 40.5 per cent. The remainder have gone through voluntary redundancy or ill health. While local authorities pick up the bill for compensation, the teacher scheme bears the cost of the early payment of pension benefits.
Glasgow has continued to operate Strathclyde's premature retirement scheme which allowed more than 100 unpromoted staff to leave last session and nearly 80 this year. The cost to the council is a one-off addition of Pounds 3, 000 to the teachers' lump sum and Pounds 1,000 a year to enhance their pension until age 60. Authorities benefit by hiring replacement staff on lower salaries.
George Gardner, the city's depute director of education, warned: "It will make it impossible for us to proceed with the current premature retirement scheme. If we have to reduce the number of teaching staff, those with the least continuous service would be most at risk because their departure would cost us less. The irony and tragedy of that situation is that these are the younger and more energetic teachers who are the very ones the profession needs the most."
Ken Wimbor, assistant secretary of the Educational Institute of Scotland, agreed. "Any incentive for local authorities to offer early retirement, whether or not the pension is enhanced, will be severely restricted if these proposals are implemented and the pressure will now be on authorities to declare teachers redundant instead."
Norman MacLeod, the pensions agency's chief executive, countered that all authorities had to pay out to the teachers' scheme through the employers' contribution in order to subsidise early retirement whether they operated such schemes or not. The agency's paper estimates that if no action is taken and premature retirements continue at current levels authorities would have to pay an extra 1.5 per cent in contributions at an extra cost to hard-pressed council budgets of Pounds 21 million. They currently pay 8 per cent.
Mr MacLeod observed: "This is essentially about good financial practice, which is that the costs should fall directly on those making the decisions." He stressed that teachers who are able to retire early after next April would not suffer. The pensions agency indicates that councils will have their contribution to the pension scheme reduced by 1.1 per cent, a saving of Pounds 15 million. But the agency's letter implies that this may be clawed back in the next grant settlement.
But Mr Gardner says the proposals will reinforce "the millennium timebomb now ticking away". He warns that there would be a haemorrhage of experienced teachers early in the next century as an ageing profession reaches retirement.
The agency also wants to tighten rules governing teachers forced out on health grounds, whose numbers have risen from 13 per cent of total retirements in 1984-85 to 20.5 per cent in 1993-94.
They will henceforth qualify for benefits, which will continue to be fully met by the teachers' scheme, only if they are "permanently unfit to teach". This means their pension will be withdrawn if they recover sufficiently to resume teaching.
Mr Wimbor criticised this as discriminating against teachers temporarily suffering from stress or the chronic fatigue illness ME. But the pensions agency says the change simply brings teachers' pensions into line with other public sector schemes.
A final amendment to the regulations will prevent what many critics have seen as the abuse of the system to pay off teachers barred for misconduct.
A furore greeted the former Lothian Region's decision two years ago to give a pension to a 56-year-old Edinburgh primary teacher who took early retirement after he had been found guilty on five charges of assaulting pupils and making indecent suggestions.