Why is my employer planning to leave to the Teachers’ Pension Scheme (TPS)?
Put simply, some employers are arguing that they can’t afford the scheme. For a few this will be true. But, for many, it is a choice. The catalyst was a significant increase to the employer contribution rate in September 2019 from 16.4% to 23.6%. The scale of the increase is in part due to unnecessary government decisions. The situation has been exacerbated by Coronavirus and the measures taken to try to prevent its spread.
Can my employer leave the TPS?
Yes. To withdraw from the scheme, your employer must give written notice to the Secretary of State for Education. 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. Usually, once an application is received, it will take approximately a month to leave the scheme.
Is it that simple?
No. Under pension regulations, the employer must conduct meaningful consultation. After, that there is the matter of contract, including contractual notice, and remedies that employees and trade union members have.
What constitutes meaningful consultation?
The NEU believes that meaningful consultation means:
- A clear proposal
- An agreed process and timetable
- Adequate time for staff to consider the proposals, not less than 90 days
- Full details of proposed alternative provision
- Full disclosure of all relevant financial and other information, including school finances, to enable staff to ask pertinent questions, propose alternatives and make informed decisions
- Genuine consideration of staff proposed alternatives, at the end of the consultation period
- A robust and independent staff representative body
Don’t I have a contractual right to the TPS?
For most teacher members the TPS is a fundamental part of their remuneration. For many, it is also part of their contractual terms and conditions. Even where this might not be the case, leading independent school lawyers are advising employers to treat it as such.
Can I oppose leaving the scheme?
Yes, you have two opportunities to do so. First in the consultation on the scheme itself required under the pension regulations. Second, on any change to your contract of employment.
Have NEU members been successful?
Yes, prior to the coronavirus lockdown in March 2020, NEU members in at least 49 independent schools have successfully prevented their employer leaving the scheme.
What do we need to do?
Act collectively as the NEU. Follow the advice on these webpages, especially the Action plan. Use the model letters. Refer to the calculator.
Do we need to go on strike?
Hopefully, not! Withdrawing labour is always the last resort when all attempts at negotiation have failed. However, the threat of industrial action may be necessary to change the employer’s mind. And striking has been successful.
Can we have local NEU advice and support?
Yes, your local NEU offices, or branch, will be able to help organise meetings, coordinate campaigns and help with ballots.
What will be the impact on my school if it leaves the TPS?
Being in the TPS is a deal-breaker for many NEU members. Leaving the scheme is likely to have a knock-on effect on teacher morale and school’s ability to attract and retain teachers.
Can my employer close the scheme to new teachers?
No. The Pensions Regulations require that an independent school employer who is a member of the TPS must offer it to all eligible staff. This means that it cannot close the scheme to new entrants.
Didn’t the government undertake consultation on implementing a mixed economy to allow this?
Yes. The decision was due in Spring 2020. As of September 2020, the outcome of the consultation is still to be announced, having been first delayed by the General election and then the Coronavirus.
But a friend at another independent tells me that some teachers are in the TPS but others not!?
Some employers have taken matters into their own hands by offering their employees a choice of remaining in the TPS [to comply with the legal requirements of the scheme] with no pay increase, or in some instances a pay cut. Those opting to come out of the pension scheme receive a pay rise, or least remain on the same salary.
What’s the implication of the firefighters and Judges, otherwise known as the McCloud case?
Following the successful legal challenge by Firefighters and Judges to the changes to the Teachers’ Pension Scheme implemented in 2015, the government has announced a public consultation on how to remove the age discrimination. The options in the TPS consultation give eligible members a choice between Final Salary Scheme benefits or Career Average Scheme benefits from 2015 to 2022. Compensation for members in the LGPS will be different owing to the different structure.
What’s the latest on the McCloud case? Do I need to do anything?
There is no need for members to take any action at this point.
The Government has already confirmed that members of all public pension schemes [including TPS] will be compensated on the same basis as the litigants in the cases already decided in respect of judges and firefighters, without any need to lodge their own cases. Any compensation claims remain unclear.
But some legal firms are offering no win no fee claims!?
Yes, but any fees will come out of any compensation that you would have been given in any event. This could be an unnecessary bill as much as £1,800 (£1500 plus VAT) in legal fees.
What will happen to my TPS benefits if my employer decides to leave?
If your employer decides to leave the TPS, your benefits accrued to date will be protected, and you will become a deferred member. You can claim your TPS pension benefits at your normal retirement age.
Will I be able to re-join the TPS if I change employers?
Yes. You will need to be employed in the maintained sector or another independent school that has remained in the TPS.
What’s the difference between a Defined Contribution (DC) and a Defined Benefit Scheme?
The TPS is a Defined Benefit Scheme giving you the certainty of how much you will receive in pension. A DC scheme states only how much will be contributed, not the level of pension.
Some DC schemes allow members to choose the level of contribution they wish to pay, with a related employer contribution. Contributions are invested on behalf of each scheme member.
The retirement benefits for each member depends on how much money has been built up by the member's retirement date and how well the investment has performed.
How do the main DC schemes being proposed compare to the TPS?
Under all reasonable assumptions a DC pension cannot provide anywhere near equivalent retirement benefits to the TPS. The likely outcome of leaving the TPS is that members will receive a significantly smaller pension at retirement.
Can comparison be made between a DB and DC be made?
A comparison between the TPS career average section and a DC pension will vary based on rate of return, earnings growth, contribution level and member age. Even if current pension contribution levels to the TPS are mirrored in a new DC scheme, the TPS career average pension still provides a superior outcome. It should be noted that neither the Aviva nor the TPT schemes mandate a minimum level of contribution higher than the statutory minimum.
Has the NEU done any calculations?
The NEU has undertaken some pension modelling to provide examples of the different level of retirement benefits one can expect from the TPS and a DC scheme.
Where can I find out more information about my current TPS benefits?
You can find out more about your TPS pension here www.teacherspensions.co.uk. Register on mypensiononline and gain full access to all your information including years of service, retirement age, current level of pension benefits and pension flexibilities.
I am worried about how this will impact my retirement plans, what can I do?
We recommend that you contact Lighthouse Financial Advice for personal independent financial advice. NEU members can receive a free, no obligation initial consultation, either 1-2-1 or school meeting.
You can book your complimentary, no obligation initial consultation by calling 0800 085 85 90 or visit www.lighthousegroup.plc.uk/affinity/neu/.