Teachers’ Pension Scheme and independent schools – summer 2020

If you cast your mind back six months, then the world was a very different place. It was pretty much ‘business as usual’ in the UK and very few people could have predicted the massive impact that Covid-19 has had upon our lives here in the intervening period.

So, if we think back to January 2020, many independent schools were actively debating whether to leave the Teachers’ Pension Scheme (TPS) due to the 40% increase in employer contributions effective from September 2019. For many schools this had already proved to have serious and sometimes even potentially disastrous financial consequences. Unfortunately, far worse was yet to come.

Independent schools on the brink

The financial implications of Covid-19 in the independent education sector have been widespread – the almost immediate reduction in fee income (due to discounts given to parents whose children have had to be taught virtually) has hit many schools very hard.

Regardless of whether schools can (legally) fully reopen for business in September, can many parents still afford the cost of private education? And for those schools that offer boarding facilities, will the international pupils return as they have done in previous years?

Sadly, a number of schools have already confirmed closures due to Covid-19. The Telegraph reported in June that 30 have announced they will be shutting their doors in 2020 permanently and many more are considering mergers or other solutions in a bid to remain afloat.

TPS top of the agenda again

With so many schools in financial difficulty, it’s no surprise that the TPS has very quickly become a red hot topic again for many governing bodies. The latest valuation of the TPS by the Government Actuaries Department has commenced and whilst the outcome won’t be known until at least early 2022, the net result is likely to be another increase to the employer contribution.

It is now understood that by September 2020, around 150 independent schools will have left the TPS since early 2019 – this was confirmed recently via a Freedom of Information request to the Department for Education from the National Education Union (NEU).

At the time of writing, we believe that any schools considering TPS exit should realistically be aiming for Easter 2021

What should schools be doing now?

We have seen a marked increase in the number of enquiries received in respect of the TPS, with many schools now looking to accelerate their plans to consult with staff upon a proposed exit.

However, schools do need to be realistic about their timescales for exit as this is not a process that can be concluded overnight by any means. There are also many factors that need to be thoroughly considered before a consultation is announced.

• Staff morale – many governing bodies have been delighted with the response from teaching staff with regard to how quickly they have adapted to the virtual classroom. Is now therefore the right time to propose the removal of the TPS? Historically it is an important and highly valued part of the remuneration package. What effect will this have on morale?
• TPS replacement – schools will need to propose a suitable alternative to the TPS, including replacing the protection benefits (life cover, etc) that come with TPS membership for staff.
• Consultation process – for all but the smallest of schools, a comprehensive consultation with affected staff will need to be undertaken. The consultation process itself can easily account for a whole term from start to finish – and generally no less than 60 calendar days.
• Notice periods – the TPS is ‘all in or all out’ and by that we mean it has to be offered to all staff or none at all. The withdrawal of the TPS is a contractual change in employment terms. If certain senior staff have long notice periods, then TPS exit for the entire teaching population can only be achieved when notice has concluded for all staff.

At the time of writing, we believe that any schools considering TPS exit should realistically be aiming for Easter 2021. This will apply to all but the very smallest of independent schools who could still potentially achieve TPS exit by January 2021.

It is clear that, regardless of the size of the school concerned, if TPS exit is being considered then governing bodies and senior management teams need to be taking positive action now to secure their future.

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