Defined Benefit  

Private schools are leaving public pension scheme

Private schools are leaving public pension scheme

Some 62 private schools are leaving the Teachers’ Pension Scheme after the government declined to give extra funding to make up for the hike in pension contributions those institutions are facing.

According to a freedom of information request to the department for Education, published on the website, four private schools requested to leave the scheme between September 2018 and March 2019, with the number shooting to 58 between April and July.

This compares with 181 independent schools leaving the scheme between 2010 and 2019, according to another FOI.

Employer contributions will increase from the current 16.48 to 23.6 per cent from September 2019 to March 2023 after the government announced in September it would be changing the rate used to calculate the liabilities of public sector schemes.

And while the government decided in April to fund state schools and further education colleges to the tune of £830m and £80m respectively this year, private schools will have to find their own funds to cover the additional cost.

Currently, state and private schools all contribute to the Teachers’ Pension Scheme, making it easier for teachers to move between the two sectors.

But recognising the cost burden on independent schools the government said in April it will consider allowing these schools to leave the scheme via phased withdrawal.

This approach would enable a school to retain its current teacher members in the scheme but would close the scheme to new entrants.

Sir Steve Webb, former pensions minister and director of policy at Royal London, noted that the £110m cost impact on private schools was too large to be absorbed which led to schools leaving the scheme.

He added: “But whilst this will save money in the short term, it could make it more difficult for such schools to recruit and retain teachers if teachers can still join the Teachers’ Pension Scheme if they work in a state school.”

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