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Schools leaving Teachers’ Pension Scheme jumps 34%

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The number of independent schools leaving the Teachers’ Pension Scheme has risen by more than a third in six months.

This is due to employer contributions rising by more than 40 per cent.

The exodus started in September 2019 when employer contributions rose from 16.40 per cent to 23.6 per cent.

A Freedom of Information Act request by Wesleyan, a specialist financial services mutual for teachers shows 27 schools have notified the Department for Education of their intention to withdraw from the scheme.

This brings the total number of schools withdrawing from the scheme since the change was initially announced in September 2018 to 107.

According to the the TPS annual reports and accounts 2018-19, there are 674,067 active members currently contributing, 629,125 deferred members and 717,037 pensions in payment as at 31 March 2018.

Sixty per cent of independent schools are contributing employers to TPS and 12.5 per cent of all contributing employers or 11,128 are private schools.

According to – DfE, Schools, Pupils and their Characteristics: January 2019 – there are 2,319 independent schools in England of which 1,396 are registered as contributing employers to TPS in March 2019.

Wesleyan: abolish tapered annual allowance in NHS pensions

The government announced that it would support state schools and further education colleges with extra funding, while private schools and higher-education institutions would have to self-fund the increase in employer contribution rates.

It has been confirmed by the National Education Union that some teachers at private schools plan to stage walk outs this week over the changes to the scheme.

Money Marketing has previously written about the increasingly complex allowance issues that have affected clients and their advisers at public sector schemes.

In July 2019 the Supreme Court ruled the government will have to make changes to pension schemes across the public sector after it found reforms made to firefighter’s pensions in 2015 were discriminatory.

The ruling effected pensions spanning the NHS, civil service, local government, teachers, police, armed forces and judiciary.

Wesleyan advice policy consultant Parminder Gill says: “The news that 107 independent schools have opted to leave the Teachers’ Pension Scheme is a concerning statistic.

“Independent schools are having to look more closely at their budgets, and examine options like increasing fees, to establish if they can afford to maintain their membership of the TPS. For some, the numbers simply don’t add up.

“When the 40 per cent increase in contributions took effect in September last year, some independent schools adopted a wait and see approach, but now many are deciding to walk away from the scheme all together.”

He adds: “We have seen an increase in demand from schools who want to give their staff transparency about the situation. If an independent school withdraws from the TPS, it is essential that teachers understand what this means for them and their long-term retirement plans.

“While retirement may feel like a long way off for some, it is worth noting that very few schemes will be as generous as the TPS because it is guaranteed retirement income, directly linked to a teacher’s salary and service with clear employer and employee contributions outlined.

“Contributions and retirement income of alternative schemes that many teachers will be exploring are less certain and can add more complexities to retirement planning.”

Comments

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  1. Although too early to see comments made to me are that some indeopendent school teachers not far from retirement are bringing forward that leaving date and others are considering returning to the state sector.

    I guess this will eventually mean that school fees will increase to level the playing field.

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