The change to the SCAPE discount rate, together with changes from cyclical scheme revaluations every four years, means that public sector employers must pay significantly higher pension contributions. These increased employer contributions were effective from 1 April 2019.
In the teachers’ scheme (TPS), it’s recognised that schools budgets run in line with academic years so the increase from 16.4% to 23.6% of teachers’ salaries is effective from 1st September 2019. Following consultation, the government will provide funding to maintained schools and further education institutions for 2019/20, but not to universities and independent schools. The size of the increase is putting pressure on independent schools’ budgets, to the extent that many may need to take extreme measures to find the extra money. For those unable to carry the additional cost burden, possible steps include:
- increasing parents’ fees
- reducing staff headcount
- holding pay awards
- transferring teachers to another pension scheme.
Under current TPS rules, employers aren’t permitted to put new joiners into a new scheme while leaving existing teachers in the TPS. The government has said they’ll consult urgently on changing this. In the meantime, schools wishing to consider alternative pension provision will need to take all teachers out of TPS into another scheme. This could be an existing arrangement already in place for non-teaching staff or an alternative scheme.
For its member schools, The Independent Schools’ Bursars Association (ISBA) has put forward an alternative scheme via its preferred providers, which is a Master Trust arrangement. Other product and service providers are also now marketing their services in this space. If you have independent schools as clients, you might want to discuss their approach to this issue.