New data from a Freedom of Information request has revealed that a total of 177 schools have now left the Teachers’ Pension Scheme (TPS) – with more than 64 pulling out since the start of the Coronavirus outbreak in March.
A key issue for most schools appears to have been the increase in contribution levels, with the amount employers are required to provide increasing from 16.48 to 23.6 per cent.
This change occurred after the Government decided to change the rate used to calculate the liabilities of public sector schemes, which has made this less cost-effective for many independent education institutions.
For the first time last year, Governors who have never before had to make decisions about pension provision for teachers in their school are now responsible for choosing alternative arrangements.
Considering the growing costs involved in the TPS, many schools are now looking at alternative pension arrangements but there remains a considerable concern that schools may not be accessing schemes suited to their requirements.
That is why many have turned to expert financial advice to help them judge between different pension arrangements, including potentially offering a ‘hybrid’ arrangement where some teachers remain in the TPS.
One such school that did this, with the support of Milsted Langdon, was Taunton School in Somerset.
Like many other independent schools, it responded to the increasing costs of the TPS by reviewing its pension arrangements.
Having taken financial advice from Sarah Searle, an Independent Financial Adviser at Milsted Langdon, it went on to set up a successful ‘hybrid’ arrangement, which allows staff to stay in the TPS if they are prepared to fund the increased contributions, or to opt-out and receive a package of similar value payable into a private pension.
Shortly after the new approach was adopted, Taunton School’s Chief Operating Officer, Nicola Miller, said: “We have all been on a steep learning curve when it comes to pensions. When we talked to our colleagues, we found that they wanted a range of different things. Some wanted to remain in the TPS and were prepared to pay extra to do so.
“Some were happy to opt-out of the TPS and have us pay contributions into a private pension, whilst a few wanted to pull out of pensions altogether. We benefited from taking expert advice and from talking to a range of pension providers before setting up an arrangement that we think works best for our people.”
Milsted Langdon has supported several schools with their pension arrangements in response to the rise in contributions and it is not surprised that the Coronavirus pandemic has prompted more institutions to review and pull out of the TPS.
Sarah Searle said: “Many independent schools were already facing complex and difficult decisions when it came to their pension arrangements before the pandemic struck, so in the current climate it is not surprising that so many more have left the TPS.
“This probably isn’t all down to the pandemic and its effect on education, and in many cases, schools may already have been considering leaving the scheme, but I think it has led many organisations to reassess their financial position and see if there are suitable alternatives.
“Alternatives pension arrangements to the TPS vary considerably, such as the amount they take in charges, the range of available investment funds and the options for members at retirement.
“Pension providers also vary in how much help they will give to individual schools in setting up a new arrangement, which is why schools and their governors should seek independent financial advice to find a solution that meets their needs.”
To find out how we can assist your school with pension arrangements, please contact us.