Independent schools: Teachers’ Pension Scheme

This article summarises the proposed changes from the Department for Education (DfE) to the Teachers’ Pension Scheme (TPS) for independent schools. This article should not be relied upon for financial advice.

Overview

You may be an independent school teacher who is concerned with being withdrawn from the TPS. All schools, including independent schools, are facing a 40% rise in employer pension contributions towards the TPS. The DfE has said it will fund this increase for state schools until the next spending review, however, independent schools must fund it themselves.

Schools Week has reported, 62 private schools in the UK have told the government that they plan to withdraw from the TPS to avoid the increased costs. Some have suggested that they would have to raise fees to cover the costs or, in extreme cases, close.

Currently, private schools are not obliged to join the TPS. They need government permission to do so, and that is conditional on all staff being either in or out of the scheme.

If your school decides to leave the TPS, your school will have to look for an alternative arrangement, but your new pension might not be as financially rewarding or have the same benefits as the TPS. In this article, we look at the DfE’s consultation on phased withdrawal, what your school should do when withdrawing from the TPS and what options are available to you.

Independent school pensions: DfE’s consultation on phased withdrawal

The DfE are seeking views regarding proposed changes to the participation of independent schools in the TPS. The consultation looks at proposals to change the TPS rules to allow independent schools opting out of the scheme to do so more flexibly. 

Under current scheme rules, an independent school electing to opt-out of the scheme results in all members becoming deferred.

The new proposal could allow independent schools, electing to opt-out of TPS participation for future teaching staff, to allow existing staff to remain as active members.

So essentially, if you are an existing member of staff you would still continue to be enrolled in the TPS, but it would be closed for new teachers.

What should happen if my school is withdrawing from the TPS?

The TPS website has a number of steps which independent schools must consider before withdrawing from the TPS. These include:

• Consulting with staff in line with relevant legislation and advising there may be changes to their contract of employment and terms and conditions. It is recommended that members seek independent financial advice to help them fully understand the impact on their pension and future retirement plans
• Providing an alternative pension scheme. Under workplace legislation, schools must enrol all eligible staff into a qualifying pension scheme from the first day after they leave the Teachers’ Pension Scheme.
• Advising staff of the benefits of the alternative pension scheme to ensure they understand what the changes will mean to them (and what they could potentially lose through changing to a new scheme)

What options are available to me?

You will be able to contribute in your school’s consultation process if it is considering to leave the TPS. You can also contact us to discuss your situation with one of our caseworkers who will be able to offer advice and guidance.

We will be unable to offer any financial advice or contribute in the consultation process at your school, however, we will be able to assist you with the options available to you.

For more information on the TPS please see another article in our Knowledge Base.