A Freedom of Information request sent to the Department for Education by Broadstone on 14 December has revealed that 207 independent schools have left the Teachers’ Pension Scheme (TPS) since the start of January 2019. This is a 17% increase upon the previously reported figure of 177 in September.
The total of 207 schools is indicative of a clear direction of travel, with approaching a fifth of the 1171 independent schools previously in the TPS now having left the Scheme in the past 24 months. A number of the schools that have left can be accounted for by those that have either closed or merged with others. The majority however will have exited following an active consultation process where the school concerned has replaced the TPS with a DC scheme in order to manage the increasing costs that are associated with TPS participation. We are aware that a large number of schools are currently consulting with staff (or will be launching consultations early in 2021) and further exits will follow in 2021 and beyond.
An actuarial valuation of the TPS is underway and we expect to hear the results at some point in 2022. The next key date for schools is 1 April 2023 – this is the date at which the review of the employer contribution rate is due. It is widely expected that employer costs will rise again – from the current 23.68% to anywhere between 30% and 35%.
Schools that are planning to remain in the TPS, for now, can from spring 2021, opt for ‘phased withdrawal’. This effectively allows a school to close the TPS to new members of staff, whilst allowing existing staff to remain in the Scheme. Currently, the TPS is ‘all in or all out’ – therefore participating schools are obliged to offer the TPS to all new members of staff.
Following a recent consultation, the government has now agreed to change the rules for independent schools. Phased withdrawal is not a ‘magic bullet’ that will reduce TPS costs overnight, but it will allow schools with a reasonably regular turnover of staff to gradually reduce their obligations to the TPS over time. A helpful addition to the list of available options and one which affords schools some protection against the risks associated with the TPS.
All schools that are considering taking action to mitigate their future TPS costs are encouraged to seek appropriate professional advice in order to fully understand the options that are available to them.