The new deal under negotiation

13th January 2006 at 00:00
Huge changes to the Teachers' Pensions Scheme which will affect all those who start teaching after September 2006 are the subject of discussions between the teaching unions and the Department for Education and Skills.

The results are expected by June. The main proposals include:

* A more generous method of calculating benefits. At present, staff receive a pension of 180th of their average salary for each year of service , together with a tax-free lump sum of 380ths. The DfES suggests that pensions should be calculated on 160th of salary plus the option of taking 25 per cent of the pension as a tax-free lump sum.

* A more flexible approach to retirement. This might involve teachers being able to take some of their pension benefits while working part-time or taking a post with less responsibility.

* A tightening up of the regulations on ill-health retirement. The DfES is proposing a two-tier system of ill-health retirement which would mean that only those who are too ill to work at all would receive an enhanced pension. Anyone who can take a job outside teaching would not be credited with any extra pension.

However, young teachers who become too ill to work would receive more generous retirement benefits.

* An increase in the death-in-service benefit from to two to three times'

salary. However, the DfES has indicated that teachers might be expected to make higher pension contributions to qualify for this.

* Increased flexibility over pension top-ups such as buying in additional years of service or "past added years". Today, tax relief can only be received on additional pension contributions of up to 9 per cent of salary.

The DfEs is suggesting that this limit should be increased.

* Dependants' benefits would be paid for life. Under today's archaic rules, teachers' widows and widowers lose their pensions if they re-marry.


New laws affecting pension rights will definitely impinge on teachers .

* Now that civil marriages for same-sex partners have been legalised, the DfES has introduced pensions for civil partners.

* In line with the Finance Act 2004, from April all teachers will be allowed to take 25 per cent of their additional voluntary contributions (AVC) fund as a tax-free lump sum, instead of using all of it to buy an annuity. As long as annuity rates remain disappointingly low, this represents a welcome option financially.

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