The Government has announced that the employer contribution rate of the Teachers’ Pension Scheme (TPS) will rise from 23.6 per cent to 28.6 per cent of pensionable pay from 1 April 2024.
The change announced last week may challenge the future affordability of the TPS for independent schools, resulting in some seeking alterative pension options.
A significant number of independent schools have chosen to leave the TPS in favour of a defined contribution scheme since 2019, when the employer contribution rate rose from 16.4 per cent to 23.6 per cent. Another hike in employer contributions could prompt more to leave the TPS as they battle to manage their costs.
Justin Corliss, senior pensions development manager at Royal London, said: “The changes announced by the Government may challenge the future affordability of the TPS for independent schools, especially at a time when they face rising costs across the board. The latest increase may result in independent schools seeking alternative pension options to manage immediate cost challenges and to provide greater certainty around future costs.
“A rate rise of over 20 per cent is difficult to absorb in the best of times, but with independent schools already facing pressures to maintain pupil numbers and restrict fee increases as much as possible, this latest cost hike could drive the need to take action.”
