For schools, the Teachers’ Pension Scheme (TPS) became less attractive when the contributions for members went from 16.4% moved to 23.68% in England and Wales. The changes, which came into effect on 1st September 2019, increased the pension bill for schools considerably.
After a consultation, the government changed the rules to stop the TPS being mandatory for independent schools. While state schools are obliged to enrol their teachers into the TPS, independent schools now have the freedom to shop around. Most have found it necessary to do this, as they simply cannot afford such a significant increase in the contributions.
The consequence for teachers is that schools have started shopping around for different teachers’ pension arrangements. The TPS is an attractive proposition for teaching staff, as it offers significant benefits that you couldn’t hope to achieve in an off-the-shelf option. If the school opts out, then all teachers are out of the teachers’ pension scheme, and this will directly impact on contributions and status in the scheme.
What should you do?
While this sounds like the TPS is the best option for teachers but too expensive for schools, some institutions are making wise moves in creating a package that is attractive to employees. There is an alternative DC (direct contributions) scheme, which, when set up, will protect schools from the pressure of pension contribution increases while offering decent benefits to staff. Other schools are suggesting giving a choice to their team. The choice is stark: choose the DC scheme or select the TPS and take a pay cut. This choice is not straightforward, and teachers are advised to take advice from an independent financial adviser.
The content in this article was correct on 15th September 2020. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on your teachers’ pension scheme, as well as financial matters in general. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.