From September 2019 the TPS employers' pension contribution will increase from 16.4% to 23.5% meaning a 43% increase for schools
How will this affect you?
This increase to the unfunded public sector pension scheme follows the recent government valuation which highlighted the growing shortfall of receipts against payments across this and other public sector pensions.
What can you do?
Schools can’t increase their member contributions and will need to either fund this increase themselves or make a more radical change to teachers benefits. Bursars and governors will need to review their finances and determine the impact of this increased cost to decide how it can be funded and consider what alternatives may be available. It may be that increases in pupil numbers, higher fees or reduced pay rises may be called for? Alternatively, schools may consider pulling out of the TPS altogether and replacing it with an alternative ‘defined contribution’ pension scheme for all teachers. This option would need careful consideration of the alternatives available and the potential advantages and disadvantages of any pension changes.
Introducing an alternative pension scheme to the one offered by the TPS may provide an advantage of greater flexibility for a school, such as giving it the ability to increase teachers’ pay, allow members to pay lower personal pension contributions, introduce ‘salary sacrifice’ to make pension contributions more tax efficient. It could also offer (and fund) a wider range of flexible benefits such as gym membership, income protection, medical insurance and cycle to work schemes which the teachers can then tailor to meet their own personal needs. It is important to take on board that if such a change was made then financial education and advice for the teachers would be essential to make it a success. It is equally important to undertake careful evaluation of the legal considerations and any negative impact of the withdrawal of a good ‘defined benefit’ pension scheme against any potential benefits and cost savings.
Steps you need to take now
Given the size of this forthcoming increase in the TPS funding, schools will need to consider their options in detail, look at all alternatives, weigh up the pros and cons and undertake a detailed cost/benefit analysis. Their decision will, either way, be significant for the future of their school and their teachers.
How we can help you
Our specialist Employee Benefit
team can help you review the financial and wider impact of continuing to support the TPS and identify strategies for implementing alternative rewards and pension schemes. For more information or to talk to one of our advisers
please call 0330 058 6559 or email firstname.lastname@example.org