Independent schools urged to consider teachers’ pension provisions carefully

• Over 400 independent schools have left the Teacher’s Pension Scheme (TPS) since 2019¹

• TPS cost increases make it less financially viable 

• Independent schools are balancing redundancy and pay against TPS

• Alternative pension provisions for teachers must be made carefully

Independent schools should carefully consider if the generous benefits of the Teacher’s Pension Scheme (TPS) and Scottish Teachers Pension Scheme (STPS) outweigh the potential risks of staff redundancies or staff pay cuts, says Hymans Robertson. For many schools, the TPS has become cost prohibitive – and its costs remain on an upwards trajectory. A Freedom of Information request made by the consultancy found that 401 schools left the TPS between August 2019 and April 2025. The leading pensions and financial services consultancy warns that while many independent schools are leaving the TPS to manage their books, alternative systems that can ensure teachers’ pensions are adequate must be considered carefully.

Commenting on the increased costs of the TPS, Hannah English, Head of DC Corporate Consulting, Hymans Robertson, says:

 “The TPS and STPS are very generous pension schemes for teachers and the upside of their benefits should not be understated. However, TPS costs rose most recently by c.20% in April 2024, and the Scottish TPS (STPS) costs rose by c.11% in the same month. The rise in cost of pension schemes – which did not increase benefits enjoyed by teachers – is just one of four cost increases that are burdening independent schools’ ability to balance their books.

“The other costs increases on schools are the hike in employer national insurance contributions (NICs), school fees becoming subject to VAT, and the scrapping of charitable business rates (for most schools in England). For a teacher being paid £40,000 in England, the rising cost of only the TPS and employer NICs will cost a school almost £3,000 per teacher. This figure does not include cost rises caused by the VAT increase or scrapping of charitable business rates – both of which further squeeze schools ability to balance the books.”

Commenting on the number of schools opting out of the TPS, Hannah English, Head of DC Corporate Consulting, Hymans Robertson, says:

 “As independent schools are facing increasing financial pressure, many schools – now over 400 – have opted out of the TPS. A further c.300 have decided to stop offering TPS benefits to new teachers. The benefits received by teachers through the TPS should not be downplayed – it remains a very generous pension scheme, providing secured income throughout a teacher’s retirement. The question schools are having to consider is, at what cost will they remain in the TPS? If staff are taking pay cuts – or facing possible redundancies – is this a price worth paying for a generous pension scheme? 

“As a firm, we strongly advocate for an increase in how much people pay into their pensions – across all industries, and across different employment groups. But as we can see in the number of schools opting out of the TPS, it appears that for many schools this generous pension scheme risks the ability for them to be financially viable businesses.

“We have consulted with numerous schools who have reviewed their pension strategies and considered alternatives to continuing to provide the (S)TPS. They have a number of options available to them. One of these is a ‘mixed economy’ solution, where current hires remain in the (S)TPS while alternative pension arrangements are made for new hires. Another option is the ‘total reward solution’, where teachers are given the choice of opting out of the (S)TPS into a DC scheme – or staying in the (S)TPS with a reduction in pay. Finally, the most straightforward option is to move all teachers to a defined contribution (DC) scheme. This gives schools more cost certainty, but generally imposes a change on teachers. This pathway can be flexible, as schools can choose to give teachers choices such as swapping pension contributions for salary or other rewards.

“Changing someone’s retirement income can be stressful and a cause for concern. To help alleviate this, schools must listen to their teachers and ensure they are part of any pension scheme reconsideration. While financial pressure on schools continues to grow, it is crucial that those who have built a career through helping, inspiring and teaching children are supported after they leave the classroom for the final time.”

¹FOI request made by Hymans Robertson