Pensions advice for independent schools

Independent schools are facing a number of financial challenges. Teachers' Pension Scheme (TPS) costs increased from April 2024. Higher contributions, combined with the risk of a new government imposing vat on fees and removing business rate relief, means the financial pressures on independent schools continue to build. These pressures mean now is the time to be assessing your TPS options.

Latest statistics suggest that as at the end of May 2024, 363 Independent Schools across England and Wales had withdrawn from TPS (since August 2019). A further 201 Independent Schools had applied to become Phased Withdrawal schools since September 2021.

Why consider your options now?

  • Manage the risk of further cost increases – TPS costs increased by 5% in April 2024. This was the latest in a series of increases and does not result in improved benefits for teachers. Schools are effectively paying more for teachers to get the same benefits. There's a risk of further increases in the future so schools should assess whether TPS continues to represent good value for money.
  • Minimise the impact of VAT increases on fees – the General election will take place on 4 July and changes to VAT could take place soon after. Many schools are concerned that passing the full impact of VAT on to parents in the form of higher fees will have a detrimental effect on pupil numbers. Pension contributions are a material cost that schools can control. A change in pension strategy could therefore generate cost savings that would minimise the fees increases needed to balance the books.
  • Recruitment and retention impact is now lower - the risk of being an early mover has disappeared and, in our experience, retention and recruitment has not been adversely impacted for schools that have exited.

How we can help

We advise over 100 third sector and charity clients, including independent schools. We have successfully guided many of our independent school clients through a TPS exit, right through from the business case to consultation and final implementation.

How do you run a successful consultation?

If you decide you want to develop a proposal for exiting TPS, or make other changes to manage pension costs, it’s crucial to get that proposal and the accompanying consultation process right. From our experience of working with schools, we outline the key milestones and outcomes from a successful TPS exit that we implemented in 2019.

7-Month activity window Date (2019)
Initial advice given to the school. February
Decision made to run a consultation and offer a 2x matching DC scheme with a maximum employer contribution of 16%. Decided to open with an employment consultation to ensure process was complete by the end of the academic year. April
Feedback on consultation. Agreed to improve the offer and pay a further 2% for one year. April
Final decision to proceed. Teachers asked to consent to the changes. July
99% of teachers consented. Remaining 2 teachers left meaning notice periods didn’t have to be run. August 
August left TPS and teachers enrolled in a DC scheme - support during withdrawal process with TPS. August 31st

Webinar on-demand

An update on your TPS options

In response to rising employer contributions, 330 independent schools have left TPS since September 2019. A further 93 have stopped putting new teachers in TPS by using phased withdrawal.

In this webinar, we share a market update, the challenges faced by schools looking to exit TPS and how to deal with them. We were also joined by Steven Edwards from Standard Life who share details of how Standard Life can support schools looking to set up a DC pension scheme.

Watch on-demand

Get in touch

If you haven’t started considering your TPS options yet, then now is the time to be doing it. Please get in touch to discuss your options and how you go about developing a proposal.

Contact us