The mass exodus of private schools opting out of the Teachers’ Pension Scheme has reached a crescendo with 110 schools leaving in the past year.
According to a freedom of information request submitted by Pensions Expert to the Department for Education, between August 31 2019 and July 1 2020, 110 independent schools left the TPS, and a further 56 have indicated their intention to leave at a later date.
The retreat has been triggered by a rise in employer contributions in September 2019, to 23.6 per cent of salary from 16.48 per cent. For many schools, this 43 per cent increase is unaffordable.
At the start of 2019, there were around 1,170 private schools in the TPS. Taking previous opt-out figures into account, it is likely that a fifth of private schools have left the TPS or are in the process of considering such a move.
They are considering various options including alternative defined contribution schemes from a number of providers
David Woodgate, Independent Schools' Bursars Association
David Woodgate, chief executive of the Independent Schools’ Bursars Association, said: “At least another 100 schools are considering consultation on alternative options. It is likely that general economic circumstances and the state of the post-Covid-19, post-Brexit economy, together with the possibility of future increases in TPS employer contributions, will mean that more schools will consider consultation to opt out.
“They are considering various options including alternative defined contribution schemes from a number of providers.”
No flexibility in scheme rules
Mr Woodgate pointed out that the TPS’s current rules make it an “all in, all out” regime.
“It is not, for instance, possible to close the TPS to new entrants while keeping existing teachers in the scheme,” he said.
“Government consulted in the autumn of 2019 to see whether this rule should be changed; the result of that consultation is still awaited, but we understand a response is not currently a priority.”
When an employer leaves a pension scheme, they will normally become liable to pay their share of the scheme’s liabilities, but there is no exit fee for departing employers.
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In the FOI response to Pensions Expert, Kate Copley, deputy director of the teacher reward and incentives division, in the early years and school group at the Department for Education, said: “The impact of an employer leaving the scheme will be that lower contributions will be received into the scheme. However, this will be offset to some extent by reduced scheme liabilities being accrued.”
She continued: “It is too early to determine what the precise impact will be, as it will be dependent upon the number of independent schools that leave, as well as the factors that will be set for the next scheme valuation, which is due to be implemented in April 2023. It is not expected to be a significant element of the next scheme valuation.”
