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Retirement Planning > Retirement Investing

Pensions for Teachers Improve Productivity, Turnover Rate, Report Finds

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Pensions are good for the education system, the National Institute for Retirement Security found in an October report. Defined-benefit plans serve an important function in the public school system by retaining teachers and save money by reducing turnover.

Pensions aren’t simply a tool to retain teachers, though, the study found. A teacher’s productivity increases sharply within the first three to five years of teaching, according to the study; retaining teachers who are farther along in their careers increases average productivity.

“Each time a mid-career teacher, who tends to be highly effective, leaves and is replaced by an inexperienced teacher, who tends to be less effective, the school as a whole sees a drop in average productivity.,” Ilana Boivie said in the report.

Overall, teacher turnover is relatively low, but the youngest teachers and the oldest teachers are the most likely to leave their positions, the report found. While there is a drop in productivity when a teacher leaves a school, there is also a financial cost. The report cites research from the Alliance for Excellent Education that found the cost of teacher turnover nationwide was over $2 billion in 2003, or $12,500 per teacher.

Employers that offer DB plans may be able to better attract desirable skilled employees due to a “self-selection effect,” according to the report. That is, employees who are more likely to stay in their current positions tend to be more likely to choose a job that offers a pension in the first place. To support this theory, NIRS cites data from Boston College which found that since pension plans tend to favor long-term service, public employees’ longer tenure led to a preference for DB plans.

Earlier research from NIRS found that public sector employees tend to prefer defined-benefit plans to defined-contribution plans. That study analyzed seven retirement systems in six states to find that pension-style plans were selected between 75% and 98% of the time.

NIRS found that compensation, including pension benefits, led to turnover that is higher among private school teachers than public school teachers. Furthermore, when public school teachers do leave jobs, they were more likely to leave for a new school district, or to retire or raise a child. Private school teachers, by comparison, were more likely to leave the profession entirely.


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