More than a quarter of all private schools in England and Wales have pulled staff out of the generous Teachers’ Pension Scheme (TPS) according to figures shared with i.
A total of 480 independent schools have now withdrawn or partly withdrawn from the scheme – which guarantees teachers an annual pension for the entirety of their retirement – or have notified the Government of plans to do so, with 81 having done this in 2023, according to a freedom of information request from Wesleyan Financial Services.
This figure, described as “concerning” by financial planners means that many staff at private schools are now likely to get far less generous pensions once they finish their careers.
Increasing numbers of independent schools have been leaving the Teacher’s Pension Scheme in the past three years because the scheme has become more expensive.
Schools have to contribute 23.6 per cent of their salary – with this figure having increased from 16.48 per cent in 2019 – in order for teachers to remain in the scheme.
State schools were given funds to cover this increase but private schools were not, and the rate will increase further to 28.6 per cent in April.
Schools that have opted for a “phased withdrawal” oversee a system where current staff remain in the scheme but new staff are put into a different scheme.
Linda Wallace, director of Wesleyan Financial Services, a financial planning company that specialises in working with teachers and other NHS staff, said the fact that nearly 30 per cent of private schools had left, or partially left the scheme, was “concerning. “
She added: “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 provides 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 offered are less certain and can add more complexities to retirement planning.”
The TPS is a generous “defined benefit” pension scheme that gives teachers a guaranteed annual income in retirement. The exact pension they will receive is based on the salary they held during their career
By contrast, most pension schemes in the UK are ‘defined contribution’ schemes, whereby employees pay in a fixed amount into their pension and get some extra paid in by their employer – a minimum of 3 per cent of their wage. It is then their responsibility in retirement to make it last as long as possible.
More private schools have warned that they will be forced to quit the TPS if Labour rolls out its planned tax raid on the sector.
One headteacher at a private secondary school in London, who asked to remain anonymous, told i: “We’ve started contingency planning and we’re already starting to look at the future of the Teachers’ Pension Scheme.
“If Labour hits us with VAT next autumn and the employer contribution goes up for the TPS, those two things loaded up together would present quite a big financial shock to us. We’d have to go down the route of a private pension scheme.”
Julie Robinson, chief executive of the Independent Schools Council said: “Independent schools are committed to supporting their dedicated teaching staff, and this includes ensuring high-quality pension provision. The first preference for schools would be to remain in the TPS where possible and if affordable.
“However, this is becoming increasingly difficult – schools face significant cost increases as employer contributions rise, on top of an array of existing financial pressures including the effects of the cost-of-living crisis and soaring energy prices.
“Most independent schools are small community schools that are already operating on tight margins, and they will be looking for ways to cut costs while keeping fees low. Like all responsible employers when faced with such increases, they will be considering alternative schemes available to them. Teachers are schools’ most valuable resource, and schools will be doing all they can to ensure their staff have fair pay and conditions.”