Pension scheme deficits have made the headlines plenty of times over the past few years. BHS, British Steel and Carillion spring to mind, and now the spotlight has fallen on the Teacher’s Pension Scheme (TPS).
There’s rumoured to be £1.7bn black hole in the TPS and a marked increase in employer pension contributions is due to come into effect in September 2019, partly to try and fill in the deficit. Naturally this presents a problem for independent schools as they will have to justify the increase in contributions to parents who fund independent schools. Importantly, none of the 1,477 independent schools affected by the decision will receive any government funding. It could force as many as 57 schools to close according to responses to the government’s consultation.
Options for independent schools
- The first option is to pay the increase. After all, talent in the market will want the best pension provisions and ultimately that talent is teaching the children. Those that don’t pay the contributions stand the risk of losing current staff or failing to attract the right calibre of teacher.
- Secondly, schools could use the news to withdraw from the TPS and boost salaries and decrease pension contributions. This may be more appealing to graduates and younger teachers who will typically have debts to pay off and a house deposit to find.
- Thirdly, schools could withdraw from the TPS and move to a defined contribution scheme and pass the cost savings on to parents. At a time when budgets could be suffering this would be a welcome relief to bursars but poses obvious challenges to recruitment and retention.
The value of financial advice and communications support
Each school is likely to have different financial circumstances and different pension scheme requirements so it pays to seek independent financial advice – even if to check the ongoing viability of the proposed increases.
However, if a school is looking to leave the TPS and wants to source an alternative from across the market then a call to Wren Sterling’s corporate adviser team is a good place to start. Our advisers are hugely experienced in sourcing the right workplace pension scheme for institutions across the UK. Importantly, our work doesn’t stop when the pension is put in place either, which is particularly relevant for any school looking to leave the TPS.
Teachers will have questions about any pension scheme move and they will want to know the financial impact of leaving a scheme and joining a new one.

Phased withdrawal
The Department for Education is also considering allowing independent schools to leave the scheme via phased withdrawal. This potential phased-withdrawal approach would enable a school to retain its current teacher members in the scheme but would close the scheme to new entrants.
Again, this approach would require a well-constructed communications programme to avoid leaving members in limbo.
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