Letter: Pensions calculator

The Association of University Teachers thinks that changing the Universities Superannuation Scheme could assist in recruiting and keeping lecturers, principally by substituting 1/60th for 1/80th of salary as the fraction at which pension entitlement accrues ("Lecturers' pension proposal could encourage new blood", THES , December 7). This will make a bigger pension but a much smaller or non-existent lump sum.

The maximum pension entitlement under USS in respect of 40 years' reckonable service is half salary pension (40/80) and a lump sum of three times pension (or 1.5 times final salary). This package is equivalent to two-thirds of final salary and is the maximum benefit the Inland Revenue allows. It follows that a pension of two-thirds of salary would have a nil lump sum. Thus the 40/60 (or two-thirds) full-service pension as proposed by the AUT will have no lump sum. A lump sum would have to be bought by abatement of the pension.

However, exactly the same result could be achieved by sticking with 1/80ths and using the lump sum of three years' pension to buy added years at time of retirement to give a higher pension (commutation of lump sum). This is permitted under the teachers' scheme to which the 1992 universities' staffs contribute.

H. C. S. Ferguson
Pollockshields
Glasgow