Teachers’ pensions – a continuing issue

The last 12 months have been some of the hardest the independent schools sector has had to face. Attention has naturally focused on the immediate educational impact of the COVID-19 crisis, and battling to keep schools running as ‘normally’ as possible amidst the winter surge in coronavirus cases.

However, as the pandemic’s financial impact bites, another key focus for school governors and senior leadership teams (SLTs) is ensuring that the financial damage caused by the pandemic does not adversely affect the running of their schools.

Many independent schools have recently offered fee reductions, as increasing numbers of school parents face job insecurity and financial pressures. It is in this context that more schools are considering afresh the Teachers’ Pension Scheme (TPS) issue, and the affordability of employer pension contributions – which since September 2019 have stood at 23.6% of teachers’ salaries and are likely to rise again in April 2023.

How many schools have left the TPS?

An ever-increasing number of independent schools have left (or are leaving) the TPS, with a recent freedom of information request revealing that over 200 schools had already notified the Government of withdrawal.

Moreover, these numbers look set to rise significantly in the next few months. A large proportion of schools have until now adopted a wait-and-see approach to TPS, but the damage to balance sheets caused by the pandemic means that, for many, waiting is no longer an option. Fee reductions and pressures on pupil rolls due to the wider economic contraction mean that revisiting the TPS question is now on the agenda for many leadership teams.

What is the latest on the ‘phased withdrawal’ option?

In November last year, the Government announced the results of its consultation on the ‘phased withdrawal’ (or ‘mixed economy’) option. Under this, schools can keep existing members in the TPS, but close it as an option for any new staff hired. The Government has said it will be available from Spring 2021 and further details are awaited. Unless schools have a high staff turnover, the immediate financial savings will be limited. However, this option does offer a route to controlling pension costs in the medium to long term

What is the most popular method of withdrawal?

The most common approach remains to withdraw fully from the TPS and put in place a replacement defined-contribution scheme for all teachers (usually offering an approximate 16% employer contribution).

However, more schools are also adopting the ‘hybrid’ – or ‘dual pension’ – option, whereby a school remains in the TPS but also offers teachers the choice of opting out to join a parallel defined-contribution scheme. This hybrid approach can be implemented in several different ways, with staff often being required to take a salary cut to cover the increased cost of the employer contributions. This model is more complicated to implement but is often attractive to governors who wish to offer staff more choice on their pension arrangements. The right approach to the multi-faceted challenges of the TPS issue is different for every school, depending on their unique situation and financial circumstances.

How have the unions reacted?

Before the COVID-19 crisis, threats of strike action were seen from trade unions in a number of schools, and these have re-emerged as a negotiating tactic. Relations with unions have remained strained as schools have battled the challenges of safely educating children during the pandemic. One would hope the fact that children have already missed significant chunks of education over the past 12 months should, to some extent, mitigate against further strike action. However, there remains strong resistance to making changes to pensions in the union movement, and confrontational tactics cannot be ruled out.

We have also noticed an increasingly aggressive approach by trade unions to the question of formal trade union recognition. Applications for voluntary recognition have continued to be made, but now the unions are moving very rapidly to make statutory applications to the Central Arbitration Committee (CAC) where they do not see immediate progress to a signed recognition agreement. In these circumstances, careful negotiation is critical in order to ensure that any recognition agreement reflects the best interests of the school.

What particular challenges are there in consulting during the pandemic?

It is now common for consultation processes to be conducted virtually. However, schools should take care that employee representatives and individual staff have the necessary technology to participate fully in an effective consultation. It will also be important to ensure that staff receive copies of all the relevant paperwork. It may be necessary to post certain documents to home addresses, and personal email addresses may need to be used for staff not presently working.

The biggest challenge we have seen for those schools consulting this term is the level of fatigue amongst teachers. School staff have faced unique pressures and are enormously tired as a result. As a result, staff frequently ask, “do we really have to consult on this now?” In these circumstances, one option is to extend the consultation process by a further term in order to gain goodwill but we would strongly argue against pausing indefinitely a consultation once it has begun. Ultimately, reaching a certain outcome on this difficult issue is likely to be of benefit to teachers and the school as a whole.

What are the best ways to engage with teachers at such a difficult time?

A consultation on employment changes is always a difficult time in any organisation. Schools will want to ensure they care for the wellbeing of their employees and conduct the process as sensitively as possible.

Key principles include:

  • Transparency. Staff need to be convinced of the strategic/financial imperatives of the “business case”. The Governors and SLT should prepare a briefing paper explaining the reasoning behind their TPS proposals which persuades staff that difficult decisions are necessary.
  • Taking an appropriate amount of time. Any attempt to rush through the process as quickly as legally possible can backfire and jeopardise goodwill and trust.
  • Genuine engagement in consultation meetings and openness to alternative proposals.
  • Offering support to those finding the process difficult – eg, through HR or an Employee Assistance Programme.

Do you have any tips for a successful TPS consultation?

Whilst complicated, in many ways the legal side is the easier part. The key factors in a successful consultation are good communication and an empathetic tone, in order to convince staff that pension changes are truly needed if the school is to survive and/or thrive. Governors and SLTs should set this tone from the top.

What support can Moore Barlow offer?

Our team is extremely experienced in handling TPS consultations and we offer a range of fixed fee packages – ‘Gold’, ‘Silver’ and ‘Bronze’ levels – as well as bespoke pricing options. Full details are set out in our TPS Services Booklet. If you have any questions, please do get in touch.