Old money in need of new ideas

13th April 2001 at 01:00
The teaching unions want teachers' pensions improved to take account of modern career patterns and lifestyles writes Susannah Kirkman.

As well as the introduction of unmarried and same-sex partners' benefits (see TES, March 23) and an increase in overall pension levels, the unions are seeking a better deal for teachers who leave the profession early, for supply teachers, and the children of teachers who die in service. Those who work beyond 60, or who return after retirement, would also benefit from the changes.

The unions are also urging the Department for Education and Employment to take another look at early retirement. "The Government needs to take account of the stresses and strains faced today that are increasingly likely to lead to teachers having to take ill-health or early retirement," says Barry Fawcett, secretary to the Teachers' Panel.

The unions want a review of the regulation that allows premature retirement "in the efficient discharge of the employer's function". Before 1997, this was a popular escape route for burnt-out older teachers. It also benefited employers by allowing them to take on younger and more energetic staff. But the Government blocked this path by saying that employers had to bear some of the cost of early retirement.

The unions also seek improved benefits for teachers made redundant in their 50s and those who have to retire because of ill-health. They argue that all teachers who leave early on ill-health grounds should have their pensions "enhanced" or made up to the level they would have received at age 60. Those aged 45 or over should have their pensions enhanced by up to 20 years.

The unions also reason that the pension contributions of staff who work beyond 60 should be worth more since these teachers are delaying the date at which they start to draw their pensions.

The earnings limits imposed on teachers who return to the classroom after retirement should be lifted, the unions add. Currently, retired teachers can have their pensions docked if they earn too much.

"People have already earned and paid for their pensions, so why should they have their pensions reduced if they choose to work?" asks Sue Johnson, head of pensions at the Association of Teachers and Lecturers. She feels it is nonsensical that this rule only applies to those who return to teaching, not to those who take other jobs.

The children and widowers of teachers who die in service should receive more generous benefits, say the unions. The first and second children should each receive 30 per cent of the deceased teacher's pension, instead of the current 25 per cent. And women teachers' pension contributions from 1972 should count towards a pension for their widowers. At present, only contributions from 1988 are counted, which can leave teachers' widowers in dire financial straits.

Supply teaches could also receive better pensions if the new claim is accepted. The unions recommend that their pensions should be calculated in a similar way to part-time teachers. If they can prove a regular commitment to supply teaching during the 10 years before they retire, their pensions should be calculated on the basis of the equivalent full-time salary rates in their final two years. Currently, their pension is based on their last 365 days of work, which may stretch back several years in the case of teachers who only work a few days a month. This produces a lower pension.

Finally, the unions argue that teachers' pensions are unfairly reduced by the depressed pay rates. They want to see the introduction of a system called "dynamism" which protects the pensions of teachers who have retired just after a period of limited pay increases. This method, which is used by the University Superannuation Scheme, looks back over the past 20 years and increases pensions in line with average national salary increases.

"There can be little doubt that, in the current and deep-seated recruitment crisis, the need for a competitive remuneration package for teachers is imperative," the Teachers' Panel concludes.


Prudential is about to launch the teachers' stakeholder pension - a new way of topping up pensions for those earning below pound;30,000 a year.

Three-quarters of teachers will be eligible for it. But some financial experts suggest that teachers with additional voluntary contributions should await the results of a government review before switching to the new scheme.

The stakeholder pension was originally aimed at employees without an occupational pension, but the Government has now said that it can be used as a way of making extra savings for retirement. The main benefits of the stakeholder arrangement are the low charges - around 0.85 per cent per annum - and the 25 per cent tax-free lump sum.

Currently, additional voluntary contributions have to be converted into an annuity. But pressure from AVC-providers and the growing demand for more flexible pensions has led the Inland Revenue to review AVC benefits. It will consider allowing people to take 25 per cent of an AVC fund as a tax-free lump sum at retirement.

For teachers who already have an AVC, the message is not to jump ship to a stakeholder pension straight away, as the lump-sum option may be available from as early as October 2001, say the unions. It is also possible to make payments to both a stakeholder pension and to an AVC scheme.

Teachers are advised to look carefully at their options and to take independent financial advice before making a decision. "Stakeholder made easy", a leaflet about the Teachers' Stakeholder Pension, will be available shortly.

There are also details at: www.pru-teachers.co.uk

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