Size matters more to me as I draw closer to pension age

18th March 2011 at 00:00
Something has gone seriously wrong with final salary schemes

I'm of an age when I'm paying a lot of attention to the size of my likely pension, and I'm not the only one. Public sector "gold-plated pensions", including teachers' pensions, are suddenly under intense scrutiny, and quite right, too, that all pension schemes have to be analysed routinely to check that they're affordable.

However, the wider public needs to be aware that nothing is simple in a public- sector pension scheme. The Scottish Teachers' Superannuation Scheme, of course, is a paper fund; there is no actual pot of cash being invested.

Although the public purse underwrites teachers' pensions, it's also the case that all contributions disappear into the Government's coffers, too. The current 6.4 per cent is effectively a tax, and it was only in 2007 that it rose from 6.0 per cent. The timing of that increase implies that I really ought to be paying enough at the moment, but we're told that teachers' contributions might need to rise to a whopping 9.8 per cent in the coming years, even though we still die younger than our healthier colleagues down south, which ought to qualify us for some sort of discount.

What's more, the STSS has had the best part of 40 years to plan for my retirement. It's not as if most teachers flit in and out of the profession. The STSS knows what it needs to pay me in my retirement, and has done for a long, long time. When I first started teaching in the 1970s, 6 per cent was a pretty sizeable sum for public-sector workers to be paying. Increasing lifespans are not new and, indeed, have been predicted for many years. There are improvements that need to be introduced as quickly as is reasonably possible to allow for teachers to make other arrangements to compensate. Final salary schemes are immoral, in truth.

At the moment, those who contribute least relative to their eventual pensions are those who are promoted late on in their careers, likeliest to be headteachers and others in senior promoted posts. Unpromoted teachers contribute most, so they end up subsidising the pensions of the better paid. `Twas ever thus. Average salary pension schemes are long overdue.

This is not about investment in stocks and shares going wrong. The money should be there and, if it's not, questions should have been asked long ago. And there's no suggestion of a "with profits" - anything extra, the Government gets to keep, not me.

Back in the 1980s, contributions exceeded pension payments by a considerable amount. What happened to the surplus contributions then? Surely it couldn't possibly have been snaffled to fund tax cuts? That would make the government of the time, and all those who benefited, guilty of raiding our pension fund.

At least Robert Maxwell showed some sense of shame when he did the same thing a few years later.

Gordon Lawrie is a modern studies teacher.

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