Government to allow phased withdrawals from TPS from next year

Independent schools to have option of alternative
schemes for new hires

Following a consultation which only concluded on 3 November 2020 the Government has very quickly confirmed that they will legislate to allow phased withdrawals from the Teachers’ Pension Scheme (TPS) from next year.

This means that they will permit independent schools to place newly hired teachers into an alternative pension scheme whilst existing teachers remain in the TPS.

The consultation and response doesn’t cover Scotland and the Scottish Public Pensions Agency (SPPA) managed schemes (STPS and STSS), but given the similarities between the TPS and STPS in particular and the ISBA’s involvement in this proposal, it may well be just a matter of time before similar changes are considered north of the Border.  

Should you consider phased withdrawal?

Phased withdrawal is a welcome extra option that some schools might consider.

However, depending on staff turnover rates it could take a long time to have a material impact on a school’s pension scheme costs with the majority of staff remaining in the TPS for the foreseeable future.

If current costs are one of the main reasons a school has felt compelled to consider leaving the TPS, then phased withdrawal will probably take far too long to make a difference.

It will also create two tiers of pay and benefits within a school and that may become untenable over time to the teachers and/or the school. 

For example, one of our clients left a similar public sector scheme that already allowed phased withdrawal for new hires. Within just 6 years of that decision, the costs of maintaining existing members in the defined benefit (DB) scheme had become so disproportionate compared to the cost of the defined contribution (DC) scheme they use for new hires, that they concluded they had no option but to withdraw from it entirely. They have since done this, with all staff now enrolled in the DC scheme.   

What you need to think about

If you’re considering withdrawing from the TPS it’s crucial that you communicate with staff at all stages of the resulting consultation process, which should now as a matter of good practice include phased withdrawal as one of the options considered. Staff and union representatives in particular are likely to want assurance that all options have been fully considered with some detail around why a particular option hasn’t been taken forward.

If you decide to go forward with a pension change, it will no doubt be a challenging time for the school. We can help you navigate this through:

  • Putting in place a market-leading benefit structure for you and your staff
  • Communicating the change clearly and effectively to staff
  • Educating your staff on pension savings – the complexity of pensions can often cause undue worry
  • Ensuring you have the business case and due diligence in place to justify the change should your decision to change be challenged later

To talk about how we can help you, click here to contact us.

 

We appreciate how tough a time this is for independent schools, which is why we've developed a simple, cost-effective service to help support you through any pension changes you want to make. 

To find out more just click here - we'd be happy to help.

 

Posted by Graeme Bell

Topics: Workplace Savings, dc pension schemes, occupational dc, schools

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