Changes to the Teachers' Pension Scheme (TPS), designed to allow the phased withdrawal of independent schools, were introduced “too late”, according to Quantum Advisory partner and actuary, Stuart Price.

In particular, Price argued that the option was introduced too late for the around 200 independent schools that have already left the TPS for new and existing teaching staff since the increased pension contributions were introduced in September 2019.

Furthermore, he emphasised that whilst it is good that there is another option available for independent schools, some may be uncomfortable taking this option as it would mean treating teaching staff differently.

He also warned that, from 2023, contributions to the scheme are likely to increase again, which could make this option “unaffordable”, with independent schools having “no choice” but to exit the scheme for all teaching staff.

Concerns over the affordability of scheme have been growing amid continual increases in employer pension contributions, with a 40 per cent increase in September, from 16.48 per cent to 23.68 per cent.

Whilst these increases were covered by the government for state schools and universities, no support was provided to the independent school sector, prompting concerns about the affordability of the scheme in the long term for this sector especially.

Considering this, the government launched a consultation to address the issues faced by independent schools, subsequently announcing plans to allow for the phased withdrawal of independent schools from Spring 2021.

Commenting on the plans, Price stated: “Independent Schools are akin to UK businesses in the private sector where we have seen defined benefit (DB) pension schemes like the TPS as unaffordable and declining because of increasing life expectancy, low interest rates and costly additional guarantees having to be provided.

“However, for independent schools, the added difficultly is that teaching staff could access a DB pension if they worked in a state school and many teachers feel that the benefit goes hand in hand with a teaching package.

“This new legislation will allow independent schools to enrol new teaching staff into an alternative pension arrangement such as a defined contribution pension scheme and this will provide independent schools with some funding stability, while existing teaching staff retain the benefits they were promised.

“However, this new option has come too late for some as around 200 independent schools have already left the TPS for new and existing teaching staff since the increased pension contributions were introduced in September 2019.”

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