Governors at independent schools are being urged to ‘shop around’ after changes were made to the independent schools’ Teachers’ Pension Scheme which require employers to make substantially greater pension contributions.
Governors who have never before had to make decisions about pension provision for teachers in their schools are now responsible for choosing alternative arrangements. But there are concerns not all governors are seeking expert financial advice to help them judge between different pension arrangements, including potentially offering a ‘hybrid’ arrangement where some teachers remain in the TPS.
More than sixty independent schools having already notified the Government of their intention to withdraw from the Teachers’ Pension Scheme.
Taunton School has been reviewing its pension arrangements and, having taken financial advice, has set up a ‘hybrid’ arrangement which allows staff to stay in the TPS if they are prepared to fund the increased contributions, or to opt out and receive a package of similar value payable into a private pension. Having looked at the range of options, Taunton School opted to use mutual insurer Royal London as their pension provider.
Taunton School’s Chief Operating Officer, Nicola Miller, said: “We have all been on a steep learning curve when it comes to pensions. When we talked to our colleagues, we found that they wanted a range of different things.
“Some wanted to remain in the TPS and were prepared to pay extra to do so. Some were happy to opt out of the TPS and have us pay contributions into a private pension, whilst a few wanted to pull out of pensions altogether.
“We benefited from taking expert advice and from talking to a range of pension providers before setting up an arrangement that we think works best for our people.”
Sarah Searle, an Independent Financial Adviser at Milsted Langdon, who specialises in pensions for teachers said: “Independent schools face complex decisions about the right pension arrangement for their staff, and many governors will not have the experience to make that choice without taking advice.
“The alternative pension arrangements on offer can vary, such as the amount they take in charges, the range of investment funds that are available and the options for members at retirement.
“Pension providers also vary in how much help they will give to individual schools in setting up a new arrangement. If schools want to look after their staff, it is vital that they take expert advice and look at a range of options before making a decision.”
Steve Webb, former Pensions Minister and now Director of Policy at Royal London said: “Until relatively recently, most of those responsible for running independent schools have not really had to give much thought to pensions. But increased cost pressures from government have led more schools to review their pension arrangements.
“This is a complex business, and there’s no single solution that will necessarily be right for all schools. Teachers will expect their schools to have taken advice and shopped around for the scheme that best meets their needs.”
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