What can independent schools do about their pensions?

  • Describe some of the challenges of the Teachers' Pension Scheme for independent schools
  • Explain the impact of increased contributions from employers
  • Identify the death benefits

Communicating this message to teachers with many years of membership and absolute certainty in their own understanding requires levels of tact and diplomacy that are rarely required in day-to-day financial planning.

The TPS also has some unique, sometimes obscure aspects that can be technical and complex in nature but need to be understood before members can make a genuinely informed choice around their future. Choices once made are rarely reversible. Further to the McCloud Remedy, additional confusion has been created for members approaching retirement.

They will now have a choice of which scheme their benefits have accrued in over the last seven years. Simply choosing the final salary scheme is not the best option for all. Life events, changes in health, salary and service could each have a major impact on the benefits taken. 

A common symptom of teachers taking the TPS for granted is benefits not being accurately recorded, and these errors going unnoticed, sometimes for decades. Additionally, in most schools that we begin working with, only a small majority of teachers have accessed their pension information online, and fewer still have checked it for accuracy.  

At a recent one-to-one meeting, where a planner is retained by the school to provide regular clinics to their staff, a teacher was approaching retirement and thought a short meeting (at no cost to the teacher) might be beneficial in understanding the retirement process. As such, the planner reviewed the statement of benefits supplied by the TPS and identified an extended period where no contributions were recorded. He suggested the teacher contact the relevant employer to query it.

Six months later, the same teacher asked for another clinic appointment and confirmed to the planner that nine years of missing service had been restored, almost doubling the teacher's retirement income from the scheme, and bringing the teacher within the scope of the McCloud Remedy, meaning full benefits could be taken at age 60, not 67. The teacher would not have sought advice ordinarily and had simply assumed that the TPS had the correct information. 

The gradual process of educating the educators continues. The consequences of the McCloud Remedy for the TPS are not limited to contribution levels. The re-implementation of the Career Average Scheme from April 2022 will be highly significant to any teacher with more than a few years until retirement, particularly as the scheme retirement age is now linked to the state retirement age. 

As mentioned, working with schools brings various unique challenges. The following rules and principles will be useful to bear in mind: