"Teachers could lose in pension top-up row"
TUI affiliate claims teachers could lose in pension top-up row
Irish Independent, Sep 07 2004
A PENSIONS top-up scheme that the Teachers Union of Ireland (TUI) recommended to its members could cost thousands in lost potential benefits, it was claimed yesterday by an affiliate of the union.
The 1,000-member Retired Members Association (RMA) has written to union branches claiming that thousands of members have paid hefty fees to invest in a TUI-backed Additional Voluntary Contributions (AVC) scheme.
Yet the RMA claims that most would have been better offer buying additional years from the State through a commission-free government alternative, known as Notional Service Purchase (NSP) - and many could still do so if told about this before they retire.
Those who invest in the AVC scheme pay hefty fees and must usually take a chance on share performance, which has been dismal in recent years, whereas the State-backed occupational scheme provides a secure return similar to much-prized defined benefit pensions.
There are no fees or commission and the return is practically guaranteed at up to 8pc - a level most pension fund managers would envy in today's climate of falling returns - according to the RMA. It maintained that many previous attempts to warn of the problem since 2002 have been thwarted. The RMA claimed that it extends to other teachers' unions and probably across the entire public service, wherever employees have less than 40 years' service. Those about to retire, as teachers do in droves at this time of year, could face potential major losses unless they act before retirement, according to the RMA.
The letter stated: "The predicament of such members is made worse by the fact that many of them (3,100) had committed very heavily to the AVC scheme operated for the union and later discovered that the occupational scheme would have suited much better and cost much less. Typically, teachers can get the same pension at half the cost by buying the government pension instead of the alternative," maintained George O'Sullivan, a retired accountant and RMA committee member.
"At the extreme," he added, "people could pay up to seven times more to buy AVCs versus government NSPs for no additional benefit."
One member, two years from retirement, discovered that he was on course to pay €150,000 for an AVC when he could get an equal benefit NSP for €75,000, according to the RMA.
Mr O'Sullivan maintained that "hundreds" of TUI members he encountered through the RMA Citizens Advice Bureau lectures informed him they were never told of NSPs.
The RMA said a complaint has been made by a TUI retiree on this issue to the Pensions Ombudsman, Paul Kenny.
Mr Kenny wouldn't comment on that specific case, but said he was aware of a "general information deficit" regarding the option of buying additional years of service in the State sector, which was a cause for concern.
The onus to provide this information is on employers - which are schools and colleges in the case of most TUI members. "I have urged the employers concerned to draw attention to various positions, including added years." He intended to highlight this problem.
Mr Kenny said that, "historically, AVCs have been oversold", however, the case against them is not totally clear cut and much of the criticism is done with the benefit of hindsight.
"Twenty years ago, interest rates were high and projections were made in good faith." AVCs are also more flexible and can make sense for people who want to retire early, he added.
The Irish Independent furnished the TUI with a copy of the letter sent out by the RMA. It responded with a statement as follows: "We are disappointed that a copy of this letter was not sent to Head Office. We will be forwarding a copy to the trustees of the AVC scheme here. We will not be making any further comment on the matter at this moment in time."
Bill Tyson and
Orla O'Sullivan