Considering withdrawing from the Teachers’ Pension Scheme?
11 January 2021
Independent schools have been faced with a multitude of challenges as a result of the pandemic, from health and safety concerns, school closures and exam disruption. Many schools will be assessing their future sustainability and considering finances, including whether the Teachers' Pension Scheme (TPS) is a financial cost that the school can continue to bear.
For those contemplating a withdrawal from the TPS, here is a round-up of key updates and trends:
- A phased withdrawal from the TPS will be available but not until "Spring 2021"
To recap, the Government carried out a consultation on whether schools would be interested in a 'phased withdrawal'. This consultation closed in November 2019. The Government published its response in November 2020 confirming that phased withdrawal will be allowed, on the basis that it "will lessen the impact on current members". To read the Government's response in full, click here.
A phased withdrawal will allow current teachers at a school to remain in the TPS but new teachers joining the school would not be enrolled in the TPS and instead would be offered an alternative pension.
The Government intends to put the necessary regulations in place by Spring 2021, but with COVID-19 and Brexit being key and prominent issues, in reality it may take longer for this to be a viable option for schools.
If you are proposing to withdraw from the TPS, be prepared to be asked about phased withdrawal during consultation and if it has been discounted, the reasons why. The reasons will be fact specific to each school, but most schools will mirror the feedback provided during the November consultation in that this option only provides a medium to long-term impact and savings would not be immediately realised. Most schools would need a substantial amount of new teachers to join in order to see the cost savings that they require.
- Be prepared for teachers/unions to raise certain issues during the consultation process
Teachers often regard the TPS as a 'gold-plated' pension and unions are committed to supporting their members in opposing a possible withdrawal from the TPS. In our experience, unions/employee representatives (referred to collectively in this article as Representatives) often raise the following issues during the consultation process:
a. Consultation has not been 'meaningful'.
A meaningful consultation is one that takes place before the school has made a decision on the proposal and gives teachers (via their Representatives) a genuine opportunity to influence the school's decision making. In order to minimise such a challenge, you should:
- provide Representatives with clear details about the proposal, the rationale behind it and the proposed alternative pension provision;
- ensure that the timetable for consultation is not rushed;
- give Representatives and teachers adequate time to consider the proposal, raise questions/points and put forward their own proposals; and
- ensure the school responds to and genuinely considers these questions, points and proposals.
b. Consultation should be postponed for a specific reason.
Schools should anticipate such a request due to the latest lockdown and/or if teachers are under pressure (e.g. due to COVID-19 their work has increased or they have moved to online teaching). Wherever possible, build in some flexibility within your timetable as this will give schools the opportunity to give Representatives/teachers more time to consider the proposal without halting the consultation altogether.
c. The TPS is critical to the success of the school.
One argument frequently cited is that remaining in the TPS will ensure staff retention; otherwise teachers will look to move to schools to ensure they remain in the TPS. Schools should have considered the impact withdrawal may have on staff levels and morale at the outset and where possible, this should be set out in your business rationale.
d. Governors have not been visible and/or made aware of the concerns raised during consultation.
If governors are absent from the consultation process, it often gives Representatives and teachers alike the impression that they are not part of the process and are not aware of the concerns, questions and proposals being put forward. Governors (but not all) should attend, be involved in and speak at the first meeting with teachers to announce the proposal. Usually at least 1 – 2 governors will be in attendance. You should appoint one governor be the designated contact for any queries to ensure that all coms are directed to one person and replies are consistent. Ensure you keep at least 1-2 governors 'in reserve' for any potential individual appeals.
- Consider how external parties will regard your proposals
Be prepared for unions, parents and press to take interest in your proposals and where appropriate, prepare statements to address any concerns that do not deviate from existing communications.
Schools have reported parents raising concerns about proposals to withdraw and the impact this may have on maintaining skilled staff and high quality of education (highlighted at (c) above). If parents are aware of other measures their school may have taken to cut costs, this may cause them alarm, particularly in a climate whereby value for money is paramount. Communication is key and schools must ensure that they have considered all other stakeholders that may be impacted by their proposals.