Increased employer contributions to the Teachers’ Pension Scheme
In September 2018, the government announced that the employer contributions to the Teachers’ Pension Scheme (TPS) were likely to increase from 16.4 per cent to 23.6 per cent from September 2019.
This is a significant increase in cost for employers. The scale of the increase came out of the blue and is in part due to wholly unnecessary decisions by government. The proposed increase will adversely affect all employers including state-maintained schools and further education. However, it is of immediate concern to independent sector employers, who will not receive the temporary reprieve offered to state funded schools from September 2019 to April 2020.
The NEU has made robust representations to government. We are concerned that the proposed increase in employer contributions will have a significant effect on the budget of all schools and colleges in all sectors.
In a response to the joint letter from the NEU and the Independent Schools Council on 25th February, the Secretary of State, too busy to meet, stated that, while the Government’s Actuary Dept. has not completed its valuation….indicative results suggest an increase of 7% to the employer contribution rate….
In the independent sector, our concern is that it will leave some employers unable to afford the cost and forced to withdraw from the scheme altogether. For others, the additional cost will impinge on their ability to fund staff pay increases and other staff benefits.
The provision of a good pension scheme is integral to attracting good quality teachers to the profession. There will be a significant impact on the ability to recruit and retain teachers in any school or college that does not offer the TPS. It could adversely affect the overall attractiveness of the teaching profession. There will also be a negative knock-on effect on mobility of teachers between the sectors.
Because of the above factors, it is likely that there will be some school closures. The NEU is currently engaged in negotiation with the government on the proposals. We are lobbying hard on behalf of our 450,000 members, including 28,000 teacher members working in the independent sector.
NEU collective school responses
Members in an independent school in the Eastern Region have successfully challenged consultation as not meaningful. The employer stated that they had already ruled out other options, such as increasing fees, and had prepared to dismiss and re-employ on new terms. NEU members met Governors and intimated action as an outcome should they not desist. The employer agreed to withdraw the proposals. Members in other workplaces have challenged consultation as not being meaningful on account of: requested financial information not being provided; and essential detail on proposed alternative schemes not provided.
In some others, members have requested that the union conduct indicative ballots to test the strength of feeling amongst members in their school on taking industrial action. Recognition campaigns, to strengthen staff voice, are underway in many other schools.
So why is the government proposing such a significant increase in employer contributions?
The TPS is an unfunded public-sector scheme, which means that it is funded out of general government funds but with employers and employees making contributions. Along with all other public-sector schemes, the TPS is valued every four years. The valuation has two main purposes: to assess the scheme’s assets and liabilities and the cost of providing scheme benefits in the long-term. It also measures the cost-sharing arrangements introduced with the TPS career average pension in 2015.
The employer contribution rate has increased for two reasons. Firstly, the government cut the ‘discount rate’ – the assumed rate of return on scheme assets and liabilities from CPI + 2.8 per cent to CPI + 2.4 per cent. This accounts for around half the increase. Secondly, the cost sharing arrangements have been breached downwards. Low pay rises, more teachers leaving the profession than expected and teachers not living as long as expected mean pensions are cheaper to provide than previously assumed. The cost sharing legislation means scheme benefits have to be improved to give teachers equal value to that set in 2015.
Independent schools employ an estimated 50,000 teachers out of a total of 667,000 teachers in the TPS, 7% of the total - mirroring the figure for pupils in the sector. However, because independent school salaries are generally higher, it is estimated that independent schools contribute 10% of the total employer contributions.
Successful past battles
Members will recall that in 2011, the then coalition government proposed booting out all independent sector teachers from the scheme altogether and proposed other detrimental changes to the scheme.
ATL and NUT members combined forces to successfully defeat this proposal, securing concessions in other areas. Independent sector members played an active part, including strike action, public marches during teaching time, lobbying their MPs etc. We won various concessions, most notably, maintaining independent sector teachers’ right to be in the scheme.
At that time, we led the fight to retain our members right to belong to the scheme. The NEU is lobbying hard though, this time around, circumstances are slightly different, with the focus on the employer. The NEU is liaising with the Independent Schools Council [ISC].
Independent sector association response
The ISC has warned that the increase will be unaffordable for many schools. The response on behalf of the associations making up the ISC is being led by the Independent Schools’ Bursars Association [ISBA]. ISBA has commissioned an actuarial review of the conclusions reached by the government actuaries to challenge the formulae in the regulations and other underlying assumptions. They have engaged Farrer & Co solicitors to look at a possible legal challenge to the process. Representations have been made to the Treasury but to little avail.
Independent sector employers are also investigating alternative pension schemes. However, the NEU does not believe that it will be possible for an alternative scheme to offer the same benefits at similar cost. The NEU does not want this to become an excuse for employers to bring in inferior pension provision.
Questions in parliament
Questions have also been asked in the House of Commons on how government funding could mitigate the impact of increases to employer contributions on the Teachers’ Pension Scheme.
Nick Gibb stated in parliament that for 2019-20, the Department estimates that £1.1 billion more will need to be put into the Teachers’ Pension Scheme by employers to fund the contribution increase. This is: £830 million from state-funded schools, £110 million from the Independent Sector, £80 million from Further Education Colleges and £80 million from affected Higher Education Institutions. He stated that it is the Government’s intention to fund independent special schools for the costs of increased employer contributions in 2019-20, as these schools often have pupils on education, health and care plans, which are local authority funded, but the Department will be consulting to seek views on this to understand the impact these costs will impose on the independent sector.
Independent schools right to belong to the TPS
Under the Teachers’ Pensions Regulations 2010, eligible schools and colleges are able to join the TPS. Not all, but a substantial majority are members.
An independent school (in England) registered under section 99 of the Education and Skills Act 2008(1) or (in Wales) registered under section 161 of EA 2002 is eligible to apply to join the TPS by written notice issued by the proprietor to, and accepted by, the Secretary of State.
To withdraw from the scheme, the proprietor must give written notice to the Secretary of State. The school will cease to be part of the scheme from the date specified in a written notice given to its proprietor by the Secretary of State. Legally, it is not possible to close the scheme to new entrants, while maintaining membership for existing staff. In any event, the NEU believes this should not be changed.
Staff consultation on proposed contractual change
If your employer is actively considering withdrawing from the TPS, then they must make provision for meaningful consultation of staff. The TPS is a major contractual part of a teacher’s remuneration.
If the NEU, or other union is recognised, then there must be negotiation with the recognised union(s). The qualitative difference to just being consulted is that it the employer undertaking to negotiate with staff, with a view to reaching agreement. If you do not currently enjoy collective union representation rights, then we recommend that you consider seeking recognition of the NEU. This will put staff in the strongest possible position to have their voice heard and to influence decisions that directly affect your working life.
Meaningful consultation should include:
- A clear purpose to the proposal
- An agreed process and timetable
- Adequate time for staff to consider the proposals
- Sufficient information, including school finances, to enable staff to ask pertinent questions, propose alternatives and make informed decisions
- A robust staff representative body
Decisions should not have already been made. Employers should not be pre-empting discussion by preparing to dismiss and re-engage on new contracts. The NEU recommends that an appropriate period for consultation is 90 days. We have serious misgivings that consultation period of less than 60 days could be meaningful. Thereafter, depending on contractual requirements, notice of contractual change might be required.
The current position
On behalf of our members, the National Education Union is making robust representations to government. We are liaising with the ISC over the lobbying. When appropriate, we will work closely with individual employers. We will consult with members on what action members might take and advise on options.
The time scale to make any major change to pension provision is extremely tight for September 2019. Many schools draw up their financial budgets in February, finalising them by Easter. The problem is not of the employer’s making and there will be some individual employers who simply cannot afford the proposed increase. However, other employers will be making a choice. You can potentially influence that decision. We encourage members to work with their employers, on the understanding that interests might not always coincide. Provision of the TPS is a fundamental part of a teachers’ terms and conditions and members at individual schools might find themselves in dispute with their employer, if it is withdrawn. As a last resort, where appropriate, members might be forced to consider withdrawing labour.
Most independent school governors recognise the importance of TPS membership in terms of recruitment and retention of the best quality teachers. This is core to the business and the success of the school. However, there will be some governors who may not be so sympathetic to the interests of teachers and only see the cost of pension provision.
Employers should be wary of jumping into the unknown and finding themselves on the wrong side of the divide: schools that offer a good pension scheme to their teachers and those that don’t. Aware of this, some employers have informed NEU that they will delay any decision beyond September 2019 to see how things develop.
First and foremost, members should strongly lobby their employers to remain in the scheme. If your employer says that they simply cannot afford it, then members should expect a full disclosure of all relevant financial information. This should be interrogated. Only when this discussion has been exhausted, should there be any discussion of an alternative pension scheme, level of contributions and benefits.
ISBA promoted alternative pension scheme.
We have written to request details of the scheme so that our pension team can look at it in detail. We believe that alternative schemes are likely to be far inferior to the TPS.
What you can do
There is a potential significant detrimental for you, future generations of teachers, your school and ultimately the pupils.
There are things that you can do now which might positively influence the situation in your workplace.
- Get together with your fellow NEU members to make sure that colleagues are aware of the threat and to form your collective response. The NEU is by far and away the largest education union and in the independent sector. A union response in an individual school comes with that additional heft.
- This should be led by the NEU workplace rep. If there isn’t one in your workplace, now is the time for members to get organised and appoint a rep! Information on the role can be found here.
- Speak to your bursar to find out what the situation is your school or college.
- The institution’s resources might mean that they can absorb the additional cost without issue. If so, you don’t need to worry.
- If there is any doubt about continuation in the scheme you need to act as soon as possible.
- It is imperative that NEU members make robust representations to the governing body or proprietor to stress the importance of the TPS to staff and the school.
- As the largest and most influential union in the independent sector, we recommend that this is done in the name of the NEU. As appropriate, you might act in liaison with other unions, the common room, or staff pay and remuneration committee.
- If your employer is actively considering withdrawing from the TPS, then they must make provision for meaningful consultation of staff. Ask what provision is being made.
- The strongest staff voice is where the employer recognises the union to collectively represent staff. Then there is negotiation, with a view to reaching agreement.
- If the NEU is not recognised in your workplace consider seeking recognition of NEU – a statutory right, with majority of staff support.
- Should your representations prove unsuccessful, there should be a negotiation on provision for an alternative pension scheme.
- NEU reps have already reported their employers citing the pension increase as an inhibiting factor on staff pay rises for September 2019. Should your employer make such claims, NEU recommends that members seek full disclosure of all relevant financial information. This is a statutory right under recognition and the ACAS guidance on disclosure of information can be read here.
- If you need pension advice, please contact the pension team.
For personal financial advice, NEU members can receive a free, no obligation initial consultation from Lighthouse, either on a 1-2-1 basis or school member meeting. See the NEU website, Lighthouse.
- If you need local on-going support, please contact your local NEU regional office.