Many independent schools are pulling out of the Teachers’ Pension Scheme and former headteacher Michael Evans looks at some of the ramifications.
A valuable part of a teacher’s salary package
Although many teachers often give little thought to their pensions until they are close to retirement, in reality a teacher’s pension has always been an important and valuable part of the salary package. It is a guaranteed index-linked pension and it is a Defined Benefit scheme, based on an individual’s salary and service, rather than on investments. It is a scheme that follows teachers throughout their careers, making financial planning easier.
It is flexible, providing benefits for both members and their loved ones, there are opportunities to increase it and part can be taken as a lump sum. All in all, it is an excellent scheme.
An increase in the contribution of employers
Employers have always contributed towards the Teachers’ Pension Scheme (TPS) and in 2019 this contribution was increased by 43% and it has increased steadily ever since. While the government covered this uplift in maintained schools and academies, this was not the case for independent schools, who found themselves having to meet the full increase, and this has resulted in an ongoing problem for a number of them.
Many were already running on very small profit margins, and this increase has been a major blow. Their problems were not eased by the arrival of the COVID-19 pandemic, which also hit many independent schools very hard. Traditionally there has been a strong reliance on pupils from the Far East, particularly from China, but with quarantine restrictions and disruption to international travel, this supply of overseas pupils has dwindled. Schools actively began looking for ways to minimise their costs and the employer’s payment to the TPS was an obvious solution.
Withdrawing from the Scheme
In an effort to ease the situation, the Teachers’ Pension Scheme came up with a proposal to allow a phased withdrawal from the scheme. This option would allow existing members of staff to remain in the Scheme provided they continued to be employed at the school. However, any new teaching staff joining the school would not be able to join the scheme, and would have to accept the alternative pension provision, which the school is legally obliged to provide.
Employers needed to decide whether to pursue a phased or complete withdrawal from the TPS, with an understanding of what would happen in the event of future changes to the TPS. When designing an alternative defined contribution scheme, account must be taken of what the further contributions would be. Death and ill-health benefits would also need to be factored in.
A growth of teacher opposition
There has to be a consultation period between teachers and their employers, but following this, staff are usually offered two choices:
1. to remain in the TPS and take a salary cut, with further possible further cuts if employer contributions continued to increase
2. move to a new defined contribution scheme with a lower employer contribution rate and retain their full salary, bearing in mind that any new scheme might not provide the same benefits as the TPS.
The National Education Union (NEU), ever mindful of the risk of a worsening of its members’ working conditions, began to take interest. At its conference in April, members were told that 147 schools from the independent sector had already left the TPS since the previous September. According to the Girls’ Day School Trust (GDST), the figure now stands at 280 schools, with many more actively planning to leave or in consultation with their teachers prior to leaving.
This is naturally causing concern among members of the profession and the NEU claims that its members in over 60 independent schools have already successful defeated their employers’ proposals to leave the Teachers’ Pension Scheme.
The Girls’ Day School Trust, dating back to 1872, runs 23 independent girls’ schools, plus two academies, and it is very anxious to pull out of the TPS, citing the need to ensure its long-term sustainability. As an alternative to the TPS it proposes what it claims to be “one of the best (schemes) on offer in the sector with a 20% employer contribution into a flexible, defined contribution pension plan alongside other benefits”.
A hardening of attitude
This did not satisfy staff members in the Trust’s 23 schools and the NEU become involved. Kevin Courtney, joint general secretary of the NEU, called the GDST proposal to leave the TPS an unnecessary decision, pointing out that according to public accounts the Trust’s finances were in a healthy condition and there was no evidence to the contrary.
Something that particularly upset teachers was a legal notice that was served to them at the start of the consultation period, noting that those who did not accept the new pension proposals would be subjected to a “fire and rehire” process. The NEU compared this policy to the one that British Airways had been forced to drop, where staff were to be sacked and then re-employed on worse terms and conditions.
The GDST maintains that this was misleading, and it would not be the case and that the wording was simply part of a necessary legal process that needed to be followed. In no way did this indicate a predetermined outcome.
Be that as it may, GDST teachers were still not satisfied and on Monday 23 November the NEU began to ballot its members in all 23 of the GDST’s schools for strike action. This is the first time in its 149-year history that the GDST has seen such a ballot. It is due to run until 6 December.
The outcome will be noted with interest.
• A teachers’ pension is a valuable part of the salary package.
• Increase in employers’ contribution has been a problem for many independent schools.
• Many independent schools have withdrawn from the Teacher’ Pension Scheme or are considering doing so.
• Proposals to withdraw from the scheme has led to a growth in opposition from teachers.
• Attitudes have bow hardened, leading to threats of strike action.