New row over pensions

29th October 2004 at 01:00
Unions reject deal where staff must pay more for benefits which compensate for retirement age rise. William Stewart reports

Pension improvements, designed to sugar the pill of a higher retirement age for teachers, will come at a price.

Teachers are being asked if they would be prepared to contribute more towards pensions to get the full range of improved benefits the Government is offering.

The benefits, such as a better deal for spouses, were offered to placate teachers' fury at the planned increase in their normal pension age from 60 to 65 - a move being bitterly resisted by unions.

But the Government is proposing to use only half the savings from the age change to pay for improvements. That will be insufficient to fund them all so, to pay for the rest, an official consultation is asking teachers if they would be prepared to raise the portion of pay contributed to pensions from the current 6 per cent.

The full range of improvements could cost teachers between pound;100 and pound;660 extra a year. But unions are urging members to say no to higher contributions.

Sue Johnson, Association of Teachers and Lecturers head of pensions, said:

"Teachers will not take kindly to the suggestion of increased contributions at the same time as an increase in their retirement age. Demanding larger payments would lead to some opting out altogether. There is a limit to how much people will pay when they are coming in with high levels of debt," she said.

The Government is under pressure to tackle the pensions timebomb in public and private sectors and tough choices seem inevitable.

Further fears over teachers' pensions were raised this week with reports that the Treasury was considering removing public-sector workers' right to a pension based on a fixed portion of their final salary - making it dependent on variable stock-market returns.

A Treasury spokesman denied the plan, but said it had been discussed as an option in the past.

The Department for Education and Skills' consultation paper costs various improvements, but makes it clear that only a limited package would be covered by a 6 per cent teacher contribution.

Basing pension calculations of one 60th of salaries per year of service rather than one 80th and allowing teachers to take up to a quarter of their fund as a lump sum would mean a contribution increase of 0.8 per cent.

Extending benefits to unmarried and same-sex partners and making spouses' pensions lifelong would mean a 0.25 per cent increase.

Those measures could be covered by raising the retirement age. But teacher contributions would have to rise if other benefits were included in the package.

They include improving the payments to surviving dependants, who get half the deceased's pension, to reflect the new way pensions would be calculated.

Increasing death grants - lump-sum payouts for those who die in service - from two to three times a teacher's salary would mean a 0.1 per cent increase in contributions.

Joint union guidance on the consultation, sent to all schools in England and Wales this week, warns members that saying yes to increased contributions would undermine the union campaign to achieve "long overdue" improvements in pension benefits at the current 6 per cent rate.

Leader 18

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