Defined Benefit  

Almost 200 schools leaving pension scheme

Almost 200 schools leaving pension scheme

More than one in 10 private schools participating in the Teachers’ Pension Scheme are leaving the pension fund, with the majority opting for a defined contribution arrangement to avoid an increase in contributions.

David Woodgate, chief executive of the Independent Schools’ Bursars Association, said a total of 80 schools have already left the scheme since October 2018, with a further 105 schools in discussions with Aviva to join the Aviva Pension Trust for Independent Schools, a DC master trust for teachers.

At the start of 2019 there were about 1,170 private schools in the TPS and experts believe the number of institutions leaving the public sector pension scheme will increase even further.

Article continues after advert

The moves were triggered by a rise in employer contributions in September, from 16.48 per cent of salary to 23.6 per cent.

Alistair Russell-Smith, partner and head of corporate defined benefit at Hymans Robertson, said: “A lot of independent schools are considering their TPS options right now. Many of the early movers that exited in August had to leave because paying the contribution hike in September 2019 was not financially viable for them.

“Others were able to absorb the cost increases in the short term, but are now looking to make a decision, with the landscape clearer and more visibility on what other schools are doing.

"We expect there will be more exits around August 2020, as other schools complete their decision-making and run their consultations with teachers.”

The increases were triggered by the government's decision to change the rate used to calculate the liabilities of public sector schemes to reflect the Office for Budget Responsibility’s long-term growth forecasts last year.

In April, the Department for Education announced that it would support state schools and further education colleges with extra funding, while higher-education institutions such as universities and private schools would have to find their own funds to cover the hike in employer contribution rates.

Some teachers have been in uproar over the changes, with 50 teachers - out of a staff of 120 - taking strike action at St Edward’s School in Oxford last summer, according to media reports.

Neil Barton, business development manager at Broadstone, said: “There are some robust debates going on between the schools, management teams, the governors and the teaching staff.

"One of the complications is that the head teachers are members of the schemes themselves, so they are affected but are also acting as a conduit.”

Richard Soldan, partner at LCP, noted from a school’s perspective, “the best way to avoid threats of industrial action is to ensure that any proposals to move away from the TPS are fully supported by a clear business case and rationale for change, and to explain the proposals clearly to the teachers”.

Mr Russell-Smith explained that some strikes occurred because employers pushed ahead with withdrawal without properly consulting members.

“It is important to initially educate teachers on the benefits they currently have in TPS, and then explain why you are considering a change. It needs to be a genuine consultation, with a final decision only taken after that initial consultation has taken place," he said.