--- title: Insights | Independent schools | The DC pension option description: Independent schools are facing challenges following the significantly increased costs of the TPS. The DC pension option could be one to consider. image: https://www.puntersouthall.com/hubfs/PS%20Aspire/Punter%20Southall%20Aspire%20Images/All%20that%20glitters%20is%20not%20gold.jpg --- - [ Our services ](https://www.puntersouthall.com/our-services) - [ Pensions ](https://www.puntersouthall.com/pensions) - [ Defined benefit ](https://www.puntersouthall.com/defined-benefits) - [ Defined contribution ](https://www.puntersouthall.com/pensions#defined-contribution) - [ SIPP & SSAS ](https://www.puntersouthall.com/pensions#self-invested-pensions) - [ Expert witness ](https://www.puntersouthall.com/expert-witness) - [ Analytics ](https://www.puntersouthall.com/analytics) - [ Numbers for lawyers ](https://www.puntersouthall.com/analytics#numbers-for-lawyers) - [ Data compliance ](https://www.puntersouthall.com/analytics#data-compliance-for-data-confidence) - [ Legal ](https://puntersouthall.law/) - [ Employee benefits ](https://www.puntersouthall.com/service-update-apr-24) - [ Financial planning ](https://www.puntersouthall.com/service-update-apr-24) - [ Insights ](https://www.puntersouthall.com/insights) - [ Blogs ](https://www.puntersouthall.com/insights) - [ Our story ](https://www.puntersouthall.com/our-story) - [ People & culture ](https://www.puntersouthall.com/people-culture) - [ Our people ](https://www.puntersouthall.com/staff-directory) - [ Awards ](https://www.puntersouthall.com/awards) - [ Careers ](https://www.puntersouthall.com/careers) - [ Contact us ](https://www.puntersouthall.com/contact) [![Punter Southall - Animated icon](https://www.puntersouthall.com/hubfs/raw_assets/public/punter-southall-hc/library/images/client/logos/punter_southall_anim_logo.gif) ![Punter Southall - Text logo](https://www.puntersouthall.com/hubfs/raw_assets/public/punter-southall-hc/library/images/client/logos/punter_southall_text_logo.svg) ](https://www.puntersouthall.com/) ** ** ** - [ Our services ** ](https://www.puntersouthall.com/our-services) - [ Pensions ** ](https://www.puntersouthall.com/pensions) - [ Defined benefit ](https://www.puntersouthall.com/defined-benefits) - [ Defined contribution ](https://www.puntersouthall.com/pensions#defined-contribution) - [ SIPP & SSAS ](https://www.puntersouthall.com/pensions#self-invested-pensions) - [ Expert witness ](https://www.puntersouthall.com/expert-witness) - [ Analytics ** ](https://www.puntersouthall.com/analytics) - [ Numbers for lawyers ](https://www.puntersouthall.com/analytics#numbers-for-lawyers) - [ Data compliance ](https://www.puntersouthall.com/analytics#data-compliance-for-data-confidence) - [ Legal ** ](https://puntersouthall.law/) - [ Employee benefits ** ](https://www.puntersouthall.com/service-update-apr-24) - [ Financial planning ](https://www.puntersouthall.com/service-update-apr-24) - [ Insights ** ](https://www.puntersouthall.com/insights) - [ Blogs ** ](https://www.puntersouthall.com/insights) - [ Our story ](https://www.puntersouthall.com/our-story) - [ People & culture ** ](https://www.puntersouthall.com/people-culture) - [ Our people ** ](https://www.puntersouthall.com/staff-directory) - [ Awards ** ](https://www.puntersouthall.com/awards) - [ Careers ** ](https://www.puntersouthall.com/careers) - [ Contact us ](https://www.puntersouthall.com/contact) - ** ** Pension consulting 19 December 2019 [** Back ](https://www.puntersouthall.com/insights/) **Author:** Graeme Bell # DC pensions do provide teachers at independent schools' a real benefit All that glitters is not gold... ## The Independent schools' pension challenge Final salary pension schemes offered to teachers across the UK are often lauded as ‘gold plated’, but scratch below the surface and you may find they don’t glitter quite as much as the label implies.   On the other hand, defined contribution schemes are often criticised for being less valuable compared to final salary schemes, but a [well-designed defined contribution scheme](https://www.puntersouthall.com/insights/independent-schools-cost-control) can continue to provide a valued benefit to staff. Although member outcomes are less certain, they provide much greater flexibility around how and when members can access their retirement benefits, as well as flexibility with [inheritance planning](https://www.puntersouthall.com/insights/pension-death-benefits). This could potentially be at [a lower contribution cost for both employers and their staff](https://www.puntersouthall.com/insights/teachers-pension-salary-sacrifice), though contribution costs will obviously depend on the new contribution structure you ultimately agree upon. Sure the guarantees that come with final salary schemes can be attractive to staff, but those guarantees come at a cost: they assume the scheme is well funded and that ongoing funding levels, i.e. employer and employee contributions, are sustainable in the long term. It is estimated  that [TPS contributions could reach 30% in 2023](https://www.puntersouthall.com/insights/tps-contributions-30-in-2023). With total contribution costs increasing by 43% in 2019 (33% in Scotland) and further increases expected in future, sustainability is arguably the single biggest pension challenge facing independent schools today. ### What about investment risk? It is true that the investment risk under a defined contribution scheme sits with the scheme members and that the value of their investments, their pension pots, can go up or down. This is one of the main reasons why final salary schemes have been so valued historically, because the investment risk sits with the scheme first and foremost. However, a defined contribution scheme with a well-designed [default investment strategy](https://www.puntersouthall.com/insights/dc-default-strategy-survey-2021) that has an appropriate level of risk versus return for your staff demographics and a de-risking glidepath in the run up to retirement, overlaid with good scheme governance to help keep everything on track, can effectively mitigate these risks. #### Pension Freedoms? In addition, unlike most final salary schemes, the majority of modern defined contribution schemes have adapted to [Pension Freedoms](https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/pension-pot-options?source=pw#), a legislative change in 2015 that allows members greater flexibility to choose when and how they take their retirement benefits in line with their personal circumstances rather than final salary scheme rules. Defined contribution schemes are also much more portable than final salary schemes, usually giving members the option to take their pension pot with them when they change jobs and to shop around for the best deals when they decide to start taking their retirement income. ##### Consider all the costs Some final salary schemes include additional benefits and there may be costs associated with ending your participation whether in full or part. These need to be identified and considered carefully before making any decisions. To find out more please visit our comprehensive web resource [A complete guide to pension challenges faced by independent schools'](https://www.puntersouthall.com/independent-schools-pensions) To discuss further or for more information, please [contact us.](https://www.puntersouthall.com/contact) Share [** ](mailto:?subject=DC%20pensions%20do%20provide%20teachers%20at%20independent%20schools'%20a%20real%20benefit&body=https://www.puntersouthall.com/insights/independent-schools-dc-pension-benefits) [** ](http://twitter.com/intent/tweet?text=DC%20pensions%20do%20provide%20teachers%20at%20independent%20schools'%20a%20real%20benefit&url=https://www.puntersouthall.com/insights/independent-schools-dc-pension-benefits) [** ](http://www.linkedin.com/shareArticle?mini=true&url=https://www.puntersouthall.com/insights/independent-schools-dc-pension-benefits) [** ](https://www.facebook.com/sharer/sharer.php?u=https://www.puntersouthall.com/insights/independent-schools-dc-pension-benefits) [** Back ](https://www.puntersouthall.com/insights/) ### Get in touch today At Punter Southall, we have a team of highly skilled risk, compliance and legal experts with deep in-house practical experience. Get in tough if you would like a friendly chat with one of us. Get in touch** - LATEST UPDATES ## You may also be interested in [Pension consulting ](https://www.puntersouthall.com/insights/independent-schools-cost-control) - 14 December 2020 [How to get your independent school's pension costs under control](https://www.puntersouthall.com/insights/independent-schools-cost-control) [Read article](https://www.puntersouthall.com/insights/independent-schools-cost-control) [Pension consulting News ](https://www.puntersouthall.com/insights/tps-contributions-30-apr-2024) - 22 August 2023 [TPS contributions of 30% from April 2024?](https://www.puntersouthall.com/insights/tps-contributions-30-apr-2024) [Read article](https://www.puntersouthall.com/insights/tps-contributions-30-apr-2024) [Pension consulting News ](https://www.puntersouthall.com/insights/independent-schools-and-tps-where-now) - 2 June 2021 [Independent schools and the TPS. Where are we now?](https://www.puntersouthall.com/insights/independent-schools-and-tps-where-now) [Read article](https://www.puntersouthall.com/insights/independent-schools-and-tps-where-now) - ###### INSIGHTS #### Subscribe to updates Where we share what we’re thinking about and what conclusions can be drawn on everything from the work we do to the world around us. We hope you find our posts readable, relevant and thought-provoking. 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