As daily school life returns ever closer to normal, a continuing key focus for school governors and senior leadership teams is ensuring that the financial damage caused by the pandemic does not adversely affect the running of their schools in the medium and long term.
Employer pension contributions to the Teachers’ Pension Scheme (TPS) have stood at 23.68% of teachers’ salaries since September 2019. Furthermore, most analysts expect this figure to rise significantly (possibly to 30% or above) at the next valuation which is now scheduled for April 2024. This means that the on-going affordability of remaining in the TPS continues to be on the agenda for many independent schools.
The number of independent schools that have left (or are leaving) the TPS continues to rise and a recent freedom of information request revealed that approximately 230 schools had already notified the Government of withdrawal.
We expect these numbers to rise steadily 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 COVID-19 crisis means that for many this is no longer an option. In particular, a significant number of schools have pencilled in the commencement of consultations for September 2021, having decided to wait until after the summer holidays when staff will be more refreshed.
The most significant change in recent months has been in relation to the availability of the “phased withdrawal” (or “mixed economy”) option. This allows schools to keep existing members in the TPS, but close it as an option for any new staff hired going forward (in common with the approach of many private sector defined benefit schemes). The Government’s latest consultation document indicates that implementing regulations will be in place by 1 August 2021 and that this will allow schools to make use of phased withdrawal from September 2021. Unless schools have high staff turnover, immediate financial savings will be limited but this option does offer a route to controlling pension costs in the medium to long term.
Our independent schools 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 here.