Pensions in private schools: TPS withdrawal

[Elthamjohn]

Has anyone gone through this? I am really worried that my school might be about to leave the TPS, and I just don’t know where to begin…

Would they offer an alternative? What have other schools done? How do you understand what a good deal is compared to the TPS?

If all private schools withdraw from the TPS and 1 in 7 or 1 in 6 teaching staff is private sector surely this then massively also affects the state sector budgets?

There seem to be a lot of young Asian science and maths teachers being recruited straight out of uni now into private schools? If the foreign students increase so does the pool of potential teaching staff from this demographic? I am not sure about the Visa implications but I doubt eg young talented female Chinese mathematician cares too much about TPS at that point. The government should be working hard to recruit as well.

For the first time I am hearing about young state school teachers withdrawing from the TPS as COL means that they cannot afford the payments.

Yes, it does have an effect, but probably not in the way you think.

TPS contributions come to around £9 billion per annum. Spending is around £27 billion per annum. The balance sheet shows TPS is in the red to the tune of £532 billion. Private schools withdrawing reduces TPS income, but it also reduces the scheme's liabilities. In the short term, independent schools withdrawing is bad in that it reduces income without reducing spending. Longer term, however, it reduces the scheme's liabilities, so is good for TPS.

By the way, the actual figure is that 1 in 8 teachers are in the private sector and a significant proportion of them are not in TPS. Many independent schools have never been in TPS. A significant proportion of those that were have withdrawn completely or stopped admitting new members due to the increase in the employer's contribution along with the likelihood that there will be further increases.

I'd move schools tbh. The TPS is a good motivator to continue teaching. Without it I'd not continue. So I'd have moved to another school or left to protect what is already invested.

You can't lose your existing TPS entitlements even if you're no longer paying in. You would, however, only be able to rejoin on less good terms if you have more than 2 years out. And you do lose inflation adjustments I believe.

@prh47bridge that is really helpful, thank you. Only I was under the impression that the majority of independent schools were still in the TPS. A lot still are.

According to a response to an FoI request last year, there are 840 independent schools in TPS, although a number of these are no longer accepting new entrants. There are around 2,400 independent schools in England. I don't have any data to confirm this, but I suspect that a higher proportion of secondary schools use TPS than is the case for primary schools/prep schools. I also suspect that larger independent schools are more likely to be in TPS, but again I don't have any data so I may be wrong.

You may also be interested to know that around 330 independent schools have withdrawn from TPS since the last increase in employer's contributions. It is expected that employer's contributions will go up again in April, which is likely to lead to more schools either withdrawing completely or going for phased withdrawal (i.e. using an alternative scheme for new hires).

So the TPS currently has a greater deficit than the NHS?! It is a pretty shockingly large amount. I did double check the published Accounts on the DFE website because it is so shockingly huge.

Recent graduates may have to pay an additional 9per cent tax in student loan repayments so I doubt they will be prioritising TPS. I bet private schools offering them higher salaries on paper and better work/life balance could be enticing.

It was announced in October that from April, employers' contribution rates will increase from 23% to 28%.

We fought off the last attempt to take us out a few years back, but I'm sure that another one is coming. The SLT is keen to shut down our staff "Common Room" (as in the representative body, not the physical space) so we might have to go for statutory union recognition instead.

Our school now offers the Aviva "APTIS" DC pension scheme for individual teachers who want to opt out of the TPS and have more take-home pay. It's not a bad scheme, compared to others, and maybe enough colleagues will opt for it to balance the books somehow? (I wouldn't, but I'm near retirement.) Hmm.

So in summary TPS in independents used to cover about half but now covers about a third (with the proviso that some were probably never in).

I think any women of childbearing age reading this should probably be aware that taking maternity leaves will likely damage the amount paid out from a private pension (such as the APTIS one that independent schools with private pension schemes often use) more than it will TPS. There is a gender pension gap in both TPS and private schemes, but where you've got your own individual pension "pot" (as you do in a private scheme) you're more exposed to lack of growth in it, than you are with an entitlement-based scheme such as TPS.

Another aspect to be aware of is that the private schemes don't often? ever? permit early retirement on medical grounds, which seems to be something that quite a few teachers end up needing.

Yet another is that you need to know what fees are going to be charged by the private provider, and that if you don't actively manage your "pot", it may not be invested how you'd want.

Of course I suppose the whole thing (TPS) may go belly up anyway due to its deficit, as pointed out above.

It's certainly really challenging for an individual to weigh up what's best to do, even if they haven't got their head in the sand about financial planning generally.

@PrivateSchoolTeacherParent that's useful info, thanks. I haven't been following it closely because I've returned to the state sector (partly due to TPS concerns) but when we modelled it for our colleagues a couple of years ago, we did it at 25%, 27.5%, and 30%, and 30% was the tipping point at which more would want to leave rather than stay, even if they had the option to cover the additional employers' contributions.

28pc is a pretty unsustainable thing I'm afraid to say. That's a massive contribution and remember TPS is UNFUNDED! So yours and employer contributions are paying for the retired people pensions today. You have to hope and pray that in 20 years time there's enough contributions to pay your pension, which I very much doubt. Sorry it's basically a massive ponzi scheme that relies on the governments in the future being committed to the promises made by prior generations. I would not trust any of the politicians if it were me

But you trust the financial services industry, regulated by the same government?!

Another aspect to be aware of is that the private schemes don't often? ever? permit early retirement on medical grounds, which seems to be something that quite a few teachers end up needing.

I've seen this said before, but it is wrong. Most private schemes do permit early retirement (i.e. before the age of 55) on medical grounds. Of course, it is worth checking that any scheme proposed by an employer includes this.

All public sector pension schemes are unfunded. I can't imagine any government allowing them to go under.

In the private sector, defined benefit schemes have gone under when employers have been unable to cover deficits. Defined contribution schemes are much less likely to go under.

Well, our school were not proposing to include that provision and suggested to us it wasn't possible.

It wasn't the only thing they misled us on, however!

It's really important to be aware you're not comparing like with like if you're involved in one of these negotiations/disputes.

The Local Government Pension Scheme is funded. All the other public sector schemes are unfunded.

I hadn’t thought about a difference in pensions over maternity leave @Phineyj . That is a really important thing to think about.

Actually, ‘fire and rehire’ has been in the news again. I bet parents would be shocked if they knew that independent schools were threatening teachers with this.

Agreed today it seems unlikely but once we get the point when employers are being asked to make 50pc contributions (which is ultimately funded by taxpayers) then something will give. Something will have to give.

Google the FT graph of doom. We are all being completely delusional

Not necessarily but at least I can make choices

@PrivateSchoolTeacherParent - similar in ours. We fought them off but the6 have set up a new pension scheme alongside TPS and I suspect we’ll all move come the rise.

We have made it (nearly) to Christmas without any TPS announcement, thank goodness. Long may it be so.

Thank you for all your shared experiences. It is not a fun topic.

If and when they do announce, there's a legal timescale for the consultation - think it's 60 days.