Teachers' Pension Scheme, Independent schools phased withdrawal

Monday, 4 November marks the end of the Department for Education's consultation on allowing independent schools to opt out of the Teachers' Pensions Scheme (TPS) in a more flexible manner. Martin Willis, Principal at Barnett waddingham thinks it is worth considering the impact any changes may have. 

Martin Willis, Principal at Barnett Waddingham, said: “While we await the DfE’s consultation response, it’s worth considering the extent to which any change will impact on an issue that many independent schools are currently grappling with.

“TPS has a number of relatively unusual characteristics, and one of these is its ‘all or nothing’ participation requirement – it’s not possible for schools to offer membership to just some of their teachers. This has become more relevant following the increase in School contributions introduced in September – an increase from 16.4% to 23.6% was always going to be extremely challenging to absorb, and a number of Schools have already withdrawn from TPS with many others considering it. This proposal seeks to offer schools a compromise option that allows them to retain TPS for existing staff, and in this respect it makes sense and is likely to proceed.

“The question is will it make any difference? The problem is that it isn’t really a middle ground option – unless Schools have particularly high turnover this is unlikely to significantly reduce costs for a number of years. If the recent increases are unaffordable this is unlikely to solve the issue.

“On top of this it will create a two tier benefit offering for staff in identical roles, which is unlikely to be conducive to a positive environment.  Whilst retaining TPS membership for existing staff may support retention it won’t help with recruitment, particularly if the contributions offered to new hires are lower than they might be to cross-subsidise contributions to those in the TPS. 

“There will doubtless be some schools who are on the cusp of finding TPS unaffordable and concerned by the potential for further increases, and if this flexibility is introduced it may well help them. However there will also be many to which it will not make a substantial difference, and so more independent schools are likely to exit. In turn this may lead the DfE to consider further options to stem the tide. 

“As has been the case since the increase was announced it will be important for schools to carefully consider their options:

•    whether to continue to offer access to TPS (potentially just for existing staff) based on cost and risk of change in the future; and 
•    if an alternative is to be considered making sure it’s well designed to meet the needs of both schools and staff.”