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Number of independent schools withdrawing from Teachers' Pension Scheme more than doubles in one year.

Number of independent schools withdrawing from Teachers' Pension Scheme more than doubles in one year.

  • 98 independent schools have withdrawn from the Teachers' Pension Scheme since the increase in employer contributions rose by 40 percent in September 2019
  • The rate of schools leaving has accelerated, with the number of schools opting out of the scheme almost doubling in the last six months alone
  • Calls for teachers to understand their retirement planning options in the wake of leaving the scheme

The number of independent schools leaving the Teachers' Pension Scheme (TPS) has risen sharply in the first year since the 40 percent increase in employer contributions took effect.

A freedom of information request by Wesleyan has found that a total of 177 private schools have now notified the Department for Education of their withdrawal from the TPS.

The majority of the moves were triggered by a rise in employer contributions from 16.48 percent of salary to 23.6 percent that came into force in September 2019. Since then, 98 schools have served notice to leave the scheme - an increase of more than 125% - with 64 coming since the outbreak of coronavirus in March.

The government has confirmed that it will cover the increased employer contribution rates for state schools during 2019-2020, but private schools must raise funds themselves to meet the additional costs.

Parminder Gill at Wesleyan, a specialist financial services mutual for teachers, said: "The number of independent schools opting to leave the Teachers' Pension Scheme is rising at an alarming rate - putting thousands of teachers into less generous schemes.

"Although we saw an initial jump in the number of schools opting to leave the scheme following the rise in employer contributions last September, this has accelerated sharply as schools began to get a clearer picture of the long-term financial implications of meeting the additional costs.

"With the events of the recent lockdown placing increased pressure on school budgets, many more schools are assessing their TPS options right now to see if they can afford to maintain their membership."

He urged teachers at those schools that have withdrawn to consider what the move means for their future retirement plans and the immediate options they available.

Parminder added: "The TPS guarantees retirement income that is directly linked to a teacher's salary. It is one of only eight guaranteed by the government and is inflation-proof to offer teachers a secure retirement.

"Any alternative defined contribution schemes that many teachers will now have to consider are far less certain, with both employer and teacher contribution rates significantly lower than those that teachers would have experienced within the TPS.

"As with any changes to your financial situation, it's important that you explore these carefully with a professional adviser. For some, retirement might seem like a long way off, however ensuring that the right plans are put in place now can significantly benefit you in later life."

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