According to a recent report, an academy in Berwick has been ordered to pay its share of the LGPS deficit related to non-teaching staff over just seven years, rather than the standard 20-25, a decision which could lead to schools putting their plans to convert to academy status on hold.
Currently, teachers’ pensions at academies are in a national scheme, whilst support staff are in local government pension schemes. When schools convert to an academy, the newly-formed academy picks up the employer’s contribution for the non-teaching staff pensions.
The rate that an academy pays is likely to be higher than under the local authority as the LA pays a pooled rate but the academy will pay according to its staff profile and will be charged for the actuarial calculation. While if the pension fund is in deficit, which many are, the academy will be responsible for the deficit.
Since academies are on a seven-year funding agreement with the Department for Education, the local authorities view this as a seven-year contract and ask them to pay the pension deficit within seven years, rather than 25 years.
In the case surrounding Berwick Academy, highlighted within the report, the deficit amounts to around £3m and the academy has said that it has had to take an extra £90,000 from education costs to pay the additional contributions, which it says has meant a cut to its special needs resources.
If it is true that schools are put off converting to academy status by the pension costs, the Prime Minister will not be happy, as he has put housing and education at the centre of his keynote speech to the Conservative party conference and has said that he wants to see more free schools and academies.
As an accountant, Gill Freeman specialises within academy finances and charity tax.