The number of private schools withdrawing their staff from the gold-plated Teachers’ Pension Scheme (TPS) doubled 2024 as the sector prepared for upcoming VAT charges on fees and other financial headwinds.
In 2024, 177 schools withdrew or partly withdrew from the TPS, which is a generous pension scheme that gives staff a guaranteed annual income in retirement.
This is the greatest number of withdrawals from the scheme since records began, and is nearly double the 90 that pulled out in 2023.
Julie Robinson, chief executive of the Independent Schools Council, said the sector was already dealing with increased costs for keeping staff in the TPS, and extra tax rises – including the new VAT policy and rise in national insurance (NI) – made remaining in the scheme “unaffordable” for many.
The TPS is a defined benefit (DB) pension scheme, which promises an employee a set annual income in retirement that rises with inflation, no matter how long they live.
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Schools have to contribute 28.68 per cent of a teacher’s salary for them to be in the scheme.
This figure has risen from 16.48 per cent back in 2018 and 23.68 per cent in 2024, and while state schools received funding for the increased costs, private schools did not.
After Labour entered Government last summer, it also announced its intention to press ahead with plans to subject private school fees to VAT, which it enacted from January.
From April, the schools will also face higher rates of employer NI – rising from 13.8 per cent to 15 per cent from April – after a change announced in October’s Budget.
Robinson said: “Independent schools have been dealing with a range of financial challenges in recent years, including increases to TPS employer contributions. Now they face an additional triple tax whammy of VAT on fees, the loss of business rates relief, and national insurance rises.
“In these circumstances, schools are having to look at every level of their cost base and make difficult decisions. While the first preference for schools would be to remain in the TPS, for an increasing number of schools, this is simply unaffordable.
“Like all responsible employers, schools will be considering alternative schemes available to them. Teachers are schools’ most valuable resource, and schools will be doing all they can to ensure their staff have fair pay and conditions.”
But financial experts have said teachers’ retirement plans will be disrupted by their schools withdrawing from the TPS.
John Cunliffe, specialist financial adviser at Wesleyan Financial Services, said: “This trend is disrupting retirement plans, and leaving many teachers worse-off.
“The TPS offers benefits that will be nearly impossible to replicate in private pensions – from inflation-proofing to providing retirement income that’s tied directly to salary. As a result of school withdrawals, teachers are having to scrap plans that may have been decades in the making, or switching to less generous, or less certain pension alternatives.
“This not only causes stress and anxiety to serving teachers, but may dissuade people from joining the profession. And we expect the number of schools leaving the scheme to continue climbing this year as schools navigate rising operational costs.”
Last year, 54 schools entirely withdrew from the TPS, meaning all their staff were pulled from the scheme and moved into an alternative one, while a further 123 started a phased withdrawal, where new staff do not enter the scheme, but current staff remain within it.
An extra 14 schools have already announced their intention to withdraw or partially withdraw from the TPS in 2025.
A Government spokesperson said: “Through our Plan for Change we are determined to break down the barriers to opportunity children face, driving high and rising standards across education. Our teachers are integral to that mission.
“Ending tax breaks for private schools will raise £1.8bn a year by 2029/30 to help deliver 6,500 new teachers and raise school standards, supporting the 94 per cent of children in state schools to achieve and thrive.
“Private schools participate in the Teacher Pension Scheme voluntarily and are free to leave at any time.”
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