Independent schools exiting the Teachers’ Pension Scheme pass 200 at end of 2020

Broadstone sent a Freedom of Information request to the Department for Education on 14 December. It revealed that 207 independent schools had left the Teachers’ Pension System (TPS) since January 2019. This represents a 17% increase on the September figure of 177.

A total of 207 schools indicates a clear direction of travel with close to a fifth of 1171 independent schools that were previously part of the TPS having left the Scheme within the last 24 months. Some schools have closed down or merged with others, accounting for some of those that have left. Most of the schools that have left will have done so after an active consultation process in which the school replaced the TPS by a DC plan to reduce the rising costs associated with TPS participation. Many schools are currently in consultation with staff, or will launch consultations in the early 2021. Further exits are expected in 2021 and beyond.

We are currently conducting an actuarial evaluation of the TPS and expect to hear the final results in 2022. The date when the employer contribution rate review is due is April 2023, which is the next important date for schools. The expectation is that employer costs will increase again, from 23.68% at the moment to between 30% and 35%.
Schools who plan to stay in the TPS can opt for ‘phased withdraw’ starting in spring 2021. The school can close the TPS to new staff members, while allowing current staff to stay in the Scheme. The TPS is currently ‘all-in or all-out’. Participating schools must offer the TPS for all new staff members.

After a consultation, the government now has the authority to modify the rules for independent schools. Although phased withdrawal will not reduce TPS costs instantly, it will allow schools that have a fairly regular turnover of staff to reduce their obligations to TPS over time. This option is an addition to the existing options, and provides protection for schools against the TPS risks.

Schools that want to reduce their TPS costs in the future are advised to seek professional advice to understand all options.

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