Benefit lessons from civil servants
THE teaching unions are preparing a claim for improved pension benefits which will insist that the extra costs should not be passed on to their members.
The unions will seek a comparable deal to the one recently agreed by civil servants, which includes pension increases of up to 33 per cent for new entrants to the scheme, survivors' pensions for single-sex and unmarried partners, and the chance to opt for additional pension rather than a tax-free lump sum.
Civil servants will pay an extra 2 per cent in contributions to fund their new scheme, but teaching unions say that a similar charge for teachers would not be justified.
Even under the new scheme, civil servants will still only be paying 3.5 per cent of their salaries toward their pensions, while their employers will pay 14.1 per cent. Teachers' pension contributions are already 6 per cent, while their employers pay only 7.4 per cent.
Sue Johnson, head of pensions at the Association of Teachers and Lecturers, says: "There is evidence that newly-qualified teachers who are saddled with student debt won't want to pay additional pension contributions."
If a new scheme is introduced, teachers will probably be offered the option of remaining in the current one. Civil servants will have two main choices: stay in the old scheme or pay all future contributions into the new scheme.
It will also be possible to transfer past contributions into the new scheme. But, as the new benefits will cost more, 10 years' service in the old scheme will only be equivalent to approximately nine years in the new one.
Civil servants who opt for the new deal will also lose some of their ill-health retirement benefits. Currently, civil servants and teachers who take ill-health retirement have their pension "enhanced"; someone with 10 years' service, for instance, can receive the same pension as an employee who has put in 20 years. In future, civil servants who sign up for improved benefits will only be eligibl for ill-health enhancements if they are permanently unfit for any employment.
John White, director of pensions and investments at RSM Robson Rhodes, a firm that specialises in public-sector schemes, thinks that teachers may have some extremely complex decisions to make. "In general, a new pensions scheme for teachers along the civil service lines should be good news for everyone but, like most things, the more flexibility there is, the greater is the chance of making the wrong decision."
According to Mr White, the Teachers' Pensions organisation should commission experts to devise a "decision tree", which would take teachers through the options so that they can work out the best solution for them. This is already common practice in private stakeholder pension schemes.
Mr White says that teachers with unmarried partners stand to gain most, as common-law spouses receive no benefits at all in the current scheme.
"If the new proposals are adopted, the TPS will compare very favourably to the defined benefits schemes in the private sector," he says. Only 12 per cent of private pensions schemes rule out benefits for common-law partners, compared with 57 per cent in the public sector. Half of private schemes pay benefits to those in same-sex relationships, compared with 23 per cent in the public sector.
But index-linking is one advantage that public-sector pensions already enjoy over schemes in private companies. While pensions increases in the private sector are limited to 3 or 4 per cent a year, teachers' pensions are directly linked to the cost-of-living index. In 1982, for instance, teachers' pensions rose by 11 per cent.
However, union pensions experts stress that any improvements to the TPS are still a long way off; the new civil service scheme will not take effect until 2003 and the teachers' claim has not yet been presented.
RSM Robson Rhodes: 0161 455 3374. The figures on private pension schemes are from The 26th Annual Survey of Occupational Pension Schemes 2000, published by the National Association of Pension Funds