Independent schools fear TPS contributions could reach 30% in 2023

TPS employer contributions are on the rise...

More independent schools look set to leave TPS...

Punter Southall Aspire provides ongoing support to independent schools and colleges which participate in the Teachers’ Pension Scheme.

We continue to monitor the growing crisis which seems very likely to lead to more contribution increases for employers. It seems inevitable that increasing numbers of independent schools and colleges will leave the TPS.

An article this month in Pensions Expert by Stephanie Hawthorn discussed the likely scale of employer contribution increases.

Pensions Expert has stated that between August 2019 and July 2020, 110 independent schools left the Teachers’ Pension Scheme, and a further 56 have indicated their intention to leave at a later date. This is based on a freedom of information request submitted by Pensions Expert to the Department for Education. This represents a fifth of the 1,170 private schools in the TPS at the start of 2019.

Contributions increase by 43%

Employer contributions have increased to 23.6% by September 2019 from the previous level of 16.5%, a 43% increase. This is already unaffordable for many schools, and if Covid-19 reduces pupil numbers further many other schools will have no choice but to exit TPS as quickly as possible. Surely if employer contributions are expected to rise any further, many independent schools will have no option other than to walk away from TPS.

The TPS is currently underfunded

The issue of exit costs brings more potential clouds to independent schools. Like many public sector pension schemes, TPS is currently unfunded and has no deficit or exit costs. However, there is no guarantee that the Government will continue to allow participating employers to walk away without paying some sort of contribution towards their share of notional exit costs or a share of the ‘notional deficit’. This is an extremely complex area of occupational pensions, and would be difficult to introduce, but that doesn’t mean there isn’t a risk that schools who delay their decision will be able to exit on the same terms as those who have already done so. 

Stuart Arnold, associate director at Punter Southall Aspire, spoke to Pensions Expert as part of the article quoted above. Stuart said: “It is vitally important that schools go into the change with a clear understanding of the legal process.”

Punter Southall Aspire’s experts on the TPS and its Scottish equivalents have seen a wide range of requirements within teachers’ contracts of employment, highlighting how vital it is to get specific legal advice for each school.

We appreciate how tough a time this is for schools, which is why we've developed a simple, cost-effective service to help support you through any pension changes you want to make.

To find out more please visit our comprehensive web resource A complete guide to pension challenges faced by independent schools'

To discuss further or for more information, please contact us.