Protecting independent school teachers' pensions

The increase in the employer contribution to the Teachers' Pension Scheme (TPS) in September 2019 has seen a sizeable number of independent sector school employers withdraw from the scheme. Coronavirus in 2020 has exacerbated the situation.

Though, NEU members collective action has achieved notable and widespread success to forcing their employers to think again and to remain in the scheme.

NEU members will achieve significant successes in the future.

As things stand, most independent sector employers in the scheme, remain. 

• Consultation outcome: Teachers' pension scheme on phased withdrawal proposal

  The NEU is very disappointed that the Government has agreed to the proposal to allow a so-called “phased withdrawal” from the TPS was announced.

  The Government has announced, following consultation, that from Spring 2021, independent sector employers will be able to deny TPS membership to new teachers, while continuing to offer it to existing staff. The current rules require an independent sector employer who elects to join the scheme to offer TPS membership to all eligible teaching staff

  This new option will impact on employers’ decisions to leave or remain in the scheme. Some members may think this is a way in which their own pension might be saved.  However, the NEU does not believe that this decision is in the general interest of our members in the independent sector, given that moving school may now lead to loss of TPS membership.  Nor do we believe that it is for the good of the profession.

  The NEU strongly believes that all teachers, regardless of phase, or sector, should enjoy a good pension. The TPS is an integral part of a teacher’s remuneration.

  We are concerned that the decision will further undermine the TPS in the independent sector. Some employers will be emboldened to withdraw in the belief that staff opposition will be less in that their own pensions will be protected.

  Segregating teachers on such a key term of employment will build walls. It will damage the attractiveness and unity of the teaching profession as a whole; hinder movement between sectors and schools; hamper a school’s ability to recruit and retain quality teachers; and hit younger teachers hard.

  In making the decision on how to respond to an proposal from your employer to leave the TPS, we call on members to consider the bigger picture and, wherever possible, robustly resist proposals to leave the scheme, either in one fell swoop or by phased withdrawal.

  You can read the full decision here:  Teachers' Pension Scheme: independent schools phased withdrawal, consultation response

Use the following materials to assist members:

NEU Freedom of Information (FOI) request, January 2021

In January 2021, a NEU FOI request revealed that that since the increase in employer contributions from September 2019, 114 independent schools have left the TPS. In total, 980 schools are members of the scheme. This equates to 12% leaving, while 88% remain. Leavers are likely to increase, but there is a clear majority remaining in the scheme.

You can view the FOI request and response above. The response lists the schools which have applied to leave, so members can see whether local, or competitor, schools have left the scheme.

Mixed economy

Currently, the regulations require that any independent sector employer electing to join the TPS must offer it to all eligible teachers. However, this is set to change, with new legislation enabling employers to close the TPS to new staff.

It was expected that this so-called ‘mixed economy’ would become live in Spring 2021. However, this has been delayed, as the necessary statutory regulations have not been put before Parliament. This is now expected to take place in early summer, to be introduced from September.

The phased withdrawal is likely to embolden employers in their belief that NEU members will be less likely to oppose the position as long as their pension is protected. While this might have appeal to some members, we believe that it is not good news.

Segregating teachers on such a key term of employment will hit younger teachers the hardest, will hinder movement between sectors and schools, including in the independent sector, and will hurt the standing of the teaching profession. Nor is it likely to protect pensions for long. Once there is division among teachers in a school, and numbers in the TPS dwindle, it will be hard to resist an employer coming back for your pension.

We call upon members, wherever possible, to resist the mixed economy and consider their younger colleagues, the ability of the school to recruit and retain quality teachers and the standing of the profession for the future.

Fire and rehire

A watershed moment has been reached in employee relations in the sector. The use of ‘fire and rehire’ tactics has become the default position for employers trying to take away their employees’ pension against their wishes.

In most cases, the TPS is a contractual right. It cannot be simply taken away. And even if unclear, lawyers are advising employers to treat it as such and to follow the process to mitigate any legal claim.

Fire and rehire is a draconian practice that British Airways had to drop last year after it was hauled in front of the Transport Select Committee. And the Trades Union Congress (TUC) is currently campaigning for the practice to be outlawed.

Leverage of threatening industrial action

We always want to have amicable discussion with employers. Members have successfully used the proforma letters above to impress upon governors just how important the TPS is to teachers, and that it will not be given up lightly.

But, in most cases, members have been forced to threaten strike action before their employer has backed down. Prior to the first lockdown in March 2020, members in 37 independent schools requested industrial action ballots from the NEU.

In most cases, merely the threat of striking provides the leverage needed to persuade the employer.

Proportionate response

Of course, striking is a last resort. But for those colleagues who feel ‘this is not how we do things in our school’, a good question to ask your employer is: “What are you intending to do, if we do not agree?” Members have been shocked to discover that their employer is intending to sack them and reemploy them on worse terms.

Threatening to withdraw your labour is justified by the financial loss. But it is also a proportionate response to the use of draconian fire and rehire tactics.

Scheme valuation

Every four years, the Government Actuary’s Department carries out a valuation of all public service pension schemes. The next valuation would normally be implemented in April 2023. However, due to coronavirus, any change of employer contribution has been delayed until 2024.

McCloud/Sargeant age discrimination legal challenge

The issue is age discrimination in public sector pension schemes introduced in 2015. Protections meant older members of the TPS remained in the final salary scheme, or delayed joining the career average scheme when younger members transferred into the career average scheme in April 2015. This was found to be unlawful.

Eligible members will get a choice between final salary scheme benefits or career average scheme benefits for the period 1 April 2015 to 31 March 2022. The option that produces the best results will be applied. Members will be expected to choose at the point of retirement. This is known as the ‘deferred choice underpin’ (DCU).

You don’t need to do anything now: Teachers’ Pensions will contact those affected once they have been identified. You can keep up to date by checking the NEU updates on TPS age discrimination. Information can also be found on the Teachers’ Pension website.

Employer contribution to alternative schemes

If members examine the finances and agree with the employer’s contention that the business really cannot afford the increased contribution, then robust collective representation is still important in ensuring that the alternative is as generous as it can be.

Employer contributions in the TPS increased in 2019 from 16.4% to 23.68%. Employers expected an increase to 19.1%. As 19.1% was budgeted for, it should be the amount contributed to any alternative scheme, with 16.4% the minimum.

Employer argument myth-buster

Members have heard a wide range of self-serving and bogus arguments and rationales for why they should agree to surrender the TPS. Amongst others, they include:

• “Everyone else has left”: simply untrue.
• “The scheme will collapse within two years”: scurrilous scaremongering.
• “They are introducing exit fees”: simply not true. Ask to see the evidence: there isn’t any.
• “Employer contribution is increasing further”: Scaremongering, this is unknown. The review of scheme funding is not until 2023 and employer contributions will not change, if at all, until 2024.
• “Coronavirus means that it is no longer affordable”: for a few, this is true; for most, it is not. It is a choice. Ask for full disclosure of relevant information. See the suggestions in the NEU briefing on collective bargaining. Even if the NEU does not have collective representation rights, use the ACAS guidance as a model. Check the public accounts at Charities Commission and Companies House.
• “The McCloud age discrimination case means higher costs for employers”: Misinformation. It could even be the opposite. It is very unlikely that McCloud would lead to an increase in employer contributions.  If anything, there is a chance that including the impact of McCloud may lower employer contributions if the promised employee benefit improvements from 2016 are not implemented.
• “TPS is vulnerable as it is an entirely an unfunded scheme”: the TPS is a notionally funded scheme, as although there is no designated pot of money, it is state-backed and subject to all the necessary regulatory processes, including periodic valuation. Private schemes are written under either contract or trust. The TPS and other public sector schemes are written under statutory regulations and statute. This makes the claims stronger as the covenant (stemming from the state) is stronger.
• “The proposed alternative scheme offers similar benefits”: this is extremely unlikely. By common consent, the types of schemes being proposed will not offer anything like the benefits provided by the TPS.
• “This is not a cost cutting exercise”: a disingenuous argument. If not, for whose benefit is it being done? If staff oppose, will the employer withdraw the proposals?
• “TPS is inflexible and employees will benefit from being able to pay less into an alternative scheme”: a disingenuous argument. It is true that the employee contribution is set. It is true that lower employee contributions might appeal. But the significant reduction in pension is borne by only one person – the teacher. There are some illustrative calculations of the potential loss on the NEU TPS Campaign webpage.

Advice, guidance, and support

Local on-going support: contact your local NEU regional office.

Pension advice: contact the pension team pensions@neu.org.uk

Financial advice: for personal financial advice, NEU members can receive a free, no-obligation initial consultation from Lighthouse, either on a one-to-one basis or at a school NEU members’ meeting. More information: Lighthouse.