Phased withdrawal from the Teachers’ Pension Scheme

The Government has brought forward draft laws to allow independent schools to close the Teacher’s Pension Scheme to new joiners but to allow existing members to continue.

Although not required to do so, around half of all independent schools in England and Wales participate in the Teachers’ Pension Scheme (TPS).

Although offering career average pension benefits can be a useful method of retaining talent, the cost of participating in the TPS can put a significant financial strain on independent schools. With contributions rising from 14.1% to 16.4% and then to 23.6% in 2019 and with possible further rises mooted, many schools are carefully considering their options.

Under the current TPS Regulations 2014 (Regulations), independent schools that opt into the TPS are free to leave at any time but doing so would mean any teachers employed by the school would no longer be able to participate. To address this, the Government launched a consultation on its proposals to allow independent schools to opt-out of the TPS for future staff members, whilst allowing existing members to continue participating in the scheme.

In November 2020, the Government published its response to the consultation, confirming that the Regulations would be amended to allow for phased withdrawals. The draft amendments were published in June 2021, providing an insight as to how a phased withdrawal might work in practice.

As expected, the draft amendments provide for a phased withdrawal that would allow existing teaching staff to continue to be active members and any new teachers would be offered membership to an alternative pension scheme. However, the draft amendments also provide for the following groups to re-enrol into the TPS:

• Teachers who opted out of the TPS prior to the school beginning its phased withdrawal;
• Teachers who have, prior to the school beginning a phased withdrawal, left pensionable service due to family leave or sick leave, provided their leave lasted no more than five years; and
• Teachers who are deferred members immediately prior to the phased withdrawal and are on non-pensionable family or sick leave or unpaid leave.

The draft amendments also propose the creation of a different type of guarantee that would be given by schools that opt for a phased withdrawal. The new guarantee would be used to distinguish between ‘accepted’ schools (schools that have been accepted into the TPS) and phased withdrawal schools.

The Government intends to implement the draft amendments by 1 August 2021, which would allow independent schools to begin phased withdrawals from September 2021. The Government’s consultation closed on 1 June 2021 and can be found by clicking here.

For more information

For advice on participation in the Teachers’ Pension Scheme (TPS), please contact Alice Kinder or Doug Mullen.  

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