Pay cuts bursts pension bubble;Personal Finance

19th June 1998 at 01:00
Susannah Kirkman reports on a financial double whammy for college lecturers.

Further education lecturers who had their pay cut by cash-starved colleges face the prospect of substantially reduced pensions. At least three colleges have announced cuts of up to pound;5,000 a year to senior lecturers' pay. Staff in their 50s could lose as much as pound;2,000 a year from their pensions at today's rates, according to a manager at the North East Surrey College of Technology, who asked not to be named.

"The effects could be drastic, as each year for which they've contributed will count at the lower salary rate," the manager said. "It's doubly damaging for FE staff as they usually come into teaching later, so they have a poorer pensions record to start with. It's a good wheeze for employers - they save on pensions contributions as well as salaries. How long will it be before they introduce this into schools?" About 60 lecturers at the college have had their pay cut by around pound;5,000. At least 10 have refused to sign new contracts and face dismissal.

The college has also refused to allow lecturers to protect their pensions by "stepping down". Under this arrangement, teachers and lecturers can take a post with reduced responsibility, and have their contributions up to that point index-linked for the rest of their career. Final pension is based on the last three years' salary before they stepped down, or on their pay during the final three years of teaching, whichever is greater.

But North East Surrey has ruled this out, claiming the new posts carry the same responsibilities.

At the City of Liverpool Community College, 45 senior lecturers have been threatened with a pay cut of pound;3,000 to pound;4,000.

At City College in Norwich, where 30 senior lecturers are being asked to take pay cuts of up to pound;4,000, managers have refused to protect pensions. Some lecturers have offered to continue making pension contributions at their old rate of pay, but the college has said it will not foot its part of the pensions bill, at 7.5 per cent of the old salary.

Meanwhile, Teachers' Pensions, the company that administers the scheme, is taking too long to respond to requests for information, according to Peter Hutchin, City College branch secretary of college lecturers' union NATFHE.

Mr Hutchin says lecturers are desperate for advice on ways of protecting their pensions. "But we are waiting at least eight weeks for a response," he says.

Joan Gordon, head of pensions at NATFHE, says calculating the precise effect on lecturers' pensions is difficult as final salaries might well exceed their old salaries if wages keep pace with inflation. NATFHE is arguing that colleges should allow lecturers to step down if their salaries have been slashed.

Along with other unions, NATFHE is pressing the Government to introduce "pre-award dynamism", a measure that would allow pensions to be calculated on the best-paid 365 days during the last 10 years of a teacher's career, instead of the last three years. This would help teachers who had taken a drop in salary during their 50s.

NATFHE believes increased flexibility in pensions is essential. It wants the Government to consider changes to the Teachers' Superannuation Scheme recommended by the Inland Revenue recently (see TES, March 27, 1998). These would allow members of occupational pension schemes to take benefits from the age of 50 while continuing to work part-time.

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