Niche markets bring unique challenges to financial planners and often require a completely different approach to conventional advice.
The work is varied and might range from providing governing bodies, as employers, with simple light-touch guidance on employee benefits options, or educational presentations to staff, to a full review of their pension and benefits provision including group presentations to governors, teaching and operational staff as well as one-to-one meetings that give individuals access to a qualified planner they might otherwise never engage with.
Recently there has been high demand for support from schools that are considering leaving the Teachers' Pension Scheme. Often considered to be a staple element of a teacher’s remuneration package, the TPS has been forced into the spotlight since 2019 when the government increased employer contribution levels by 43 per cent with no enhancement to the benefits enjoyed by members.
For many schools this increase in overheads has proven unviable, forcing some to close, others to consolidate by merging with competitors and many more to leave the TPS and seek an alternative solution.
In March 2019 there were 1,171 independent schools in the TPS; since that date 245 schools have opted to leave the TPS altogether and circa 170 are actively considering their options with no signs of the trend slowing.
The elephant in the room for schools is the next governmental cost review, which will define the contribution levels of both employers and their employees for the following few years.
It has been delayed until 2024 to accommodate the estimated £17bn overall cost of the 'McCloud Remedy', that will correct the discrimination inflicted on the majority of members when all public service pension schemes moved from a final salary arrangement to career average in 2015.
The level of future contributions being imposed on schools and staff is the subject of much speculation. Actuarial reports commissioned by the Independent Schools' Bursars Association suggest a further cost increase of between 27 per cent and 40 per cent, but what is certain is that few independent schools can afford any significant increase at all.
The TPS is deemed virtually sacrosanct by its members who accept salaries far lower than equally qualified professionals outside the education sector, in exchange for the certainty they perceive the TPS will give them in retirement. They have seen colleagues retiring on generous final salary benefits and assume that, as fellow TPS members, they share the same destiny.
For financial planners, a considerable challenge is in 'educating the educators'. There are few substantial options or choices to make while accruing service in the TPS, beyond being a member or opting out of it all together.
Consequently, it is common for teachers to join the TPS and then give it little more thought until retirement approaches, while they focus on what is a fulfilling but demanding career. The McCloud court case has highlighted that the TPS has already changed substantially, in the benefits provided and the date they are provided, twice within the past 15 years. It is no longer the final salary pension scheme that many believe it to be.