Understanding your Teachers’
Pension Scheme options
With independent schools facing a number of financial challenges, could tackling rising
pension costs help put your school on a more secure financial footing?
Pensions advice for independent schools
Providing tailored pensions advice for independent schools, focusing on cost management and strategic alternatives to the Teachers' Pension Scheme (TPS).
Contact the team
Independent schools are facing a number of financial challenges.
Teachers' Pension Scheme (TPS) costs increased from April 2024. Higher contributions, combined with the NI hike in April 2025 and the new government imposing VAT on fees and removing business rate relief, mean the financial pressures on independent schools continue to build.
These pressures mean now is the time to assess your TPS options.
As an example, a teacher being paid £40,000 in England, the rising cost of the TPS and NI hike will result in an additional cost of £2,985 per teacher each year in April 2025 compared to costs in March 2024 – a significant increase. This figure doesn’t consider the VAT introduction and business rate change.
Recent statistics suggest that at the end of October 2024, 386 Independent Schools across England and Wales had withdrawn from TPS (since August 2019). A further 249 Independent Schools had applied to become Phased Withdrawal schools since September 2021.
Why consider your options now?
TPS costs increased by 5% in April 2024. This was the latest in a series of increases and does not result in improved benefits for teachers. Schools are effectively paying more for teachers to get the same benefits. There's a risk of further increases in the future so schools should assess whether TPS continues to represent good value for money.
In 2025 schools will face further cost increases. These include employer NI costs rises, school fees becoming subject to vat and the removal of charitable business tax relief. Many schools are concerned that passing the full impact of these increases onto parents in the form of higher fees will have a detrimental effect on pupil numbers. Pension contributions are a material cost that schools can control. A change in pension strategy could therefore generate cost savings that would minimise the fee increases needed to balance the books.
The risk of being an early mover has disappeared and, in our experience, retention and recruitment has not been adversely impacted for schools that have reviewed their pension options.
How we can help
We advise over 100 third sector and charity clients, including independent schools. We have successfully guided many of our independent school clients through a TPS exit, right through from the business case to consultation and final implementation.
How do you run a successful consultation?
If you decide you want to develop a proposal for exiting TPS, or make other changes to manage pension costs, it’s crucial to get that proposal and the accompanying consultation process right. From our experience of working with schools, we outline the key milestones and outcomes from a successful TPS exit that we implemented in 2019.
7-Month activity window |
Date (2019) |
Initial advice given to the school. |
February |
Decision made to run a consultation and offer a 2x matching DC scheme with a maximum employer contribution of 16%. Decided to open with an employment consultation to ensure process was complete by the end of the academic year. |
April |
Feedback on consultation. Agreed to improve the offer and pay a further 2% for one year. |
July |
99% of teachers consented. Remaining 2 teachers left meaning notice periods didn’t have to be run. |
August |
August left TPS and teachers enrolled in a DC scheme - support during withdrawal process with TPS. |
August 31st |
Pensions advice for independent schools
Independent schools are facing a number of financial challenges.
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Understanding your Teachers’
Understanding your Scottish Teachers’
Pension Scheme (STPS / STSS) options
With independent schools facing a number of financial challenges, could tackling rising
pension costs help put your school on a more secure financial footing?
An update on your TPS options
In response to rising employer contributions, 330 independent schools have left TPS since September 2019. A further 93 have stopped putting new teachers in TPS by using phased withdrawal.
In this webinar, we share a market update, the challenges faced by schools looking to exit TPS and how to deal with them. We were also joined by Steven Edwards from Standard Life who share details of how Standard Life can support schools looking to set up a DC pension scheme.
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