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Pension consulting
15 November 2023
Author: Punter Southall Aspire

Thinking of leaving the TPS?

A checklist for schools considering a move 

If you’re considering leaving the Teachers’ Pension Scheme (TPS) or its Scottish equivalents (STPS/STSS), you’re probably already thinking of the main reason why: unaffordable contributions, in the face of rising costs across the board. At the same time, your teaching staff may be thinking of reasons they don’t want to leave, or questions they’d like answered.  

In our experience working with almost 50 schools, several questions recur frequently.  

Here’s a handy checklist to help you answer some of them. 

Question Response
What kind of scheme is TPS/STPS?  TPS and STPS are Defined Benefit (DB) schemes. Historically they were ‘final salary’ schemes where the amount of pension you receive is based on how many years you’ve been a member of the employer’s scheme and the salary you’ve earned when you leave or retire.  Since April 2022 future accrual is now on the Career Average Revalued Earnings basis where the amount of pension you receive is based on your earnings in each year of active membership ‘revalued’ annually until when you retire  
What kind of new scheme are you proposing?  To replace TPS/STPS we want to introduce a Defined Contribution (DC) scheme. This is a type of pension where contributions from the employer and employee are paid into a fund which is invested and then converted into a pension, often in the form of an annuity. 
How does the new scheme compare to TPS/STPS?  A new scheme can be set up with benefits that mirror those available via TPS/STPS, including associated employee benefits above and beyond the pension. 
It can’t be as good as TPS/STPS We can design our new scheme and the associated benefits to suit our staff. If there are key additional benefits that we/you find valuable then those can be budgeted for. 
…so why are you moving?   Employer contributions under TPS are currently 23.68% of salary (23% for STPS*) and will rise to 28.6% from April 2024,  which makes them unaffordable for many schools, including us. With other cost pressures also increasing, finding a suitable alternative to TPS/STPS is an urgent priority for us. 

you’re thinking of a move away from TPS or its Scottish equivalents ahead of the increases to contributions, get in touch. We’ve worked through this process with many other schools and would be happy to help you.

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*STPS contribution increase still to be announced at date of publication in November 2023 

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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.