Independent schools in England and Wales will be allowed to opt out of the Teachers' Pension Scheme (TPS) for future staff members, following a consultation by the Department for Education.

The department said it intended to adopt a “phased withdrawal” approach to the issue by Spring 2021, with the schools then being granted the ability to enrol new staff members into alternative schemes while incumbent staff can remain as members of TPS.

Previously, the rules stipulated that private schools were able to seek permission from the government to quit the TPS, but all of their staff would then be withdrawn from the scheme.

Teachers joining phased withdrawal schools could be re-enrolled in the scheme in certain circumstances, such as if they returned from non-pensionable family leave or non-pensionable sick leave of up to 5 years, or if they were active member who was subject to a compulsory transfer to a successor body following a merger of two schools.

Commenting on the consultation response, Broadstone head of business development, Neil Barton, stated: “Whilst phased withdrawal will be more attractive to certain schools than to others, this additional option for consideration is welcome.

"Schools opting for phased withdrawal will need to ensure that the defined contribution scheme provided for the new teaching staff is well designed and offers a highly competitive employer contribution, as schools will no doubt be competing against each other in a bid to attract the best teaching talent.”

Employer contributions to the defined benefit TPS increased to over 40 per cent in September 2019, leading to 178 independent schools leaving the scheme, as of September 2020.

The consultation, which was launched on 9 September and closed on 3 November, garnered 90 per cent of its responses from individuals, with the remaining portion coming from employers, unions and independent schooling associations.

More than half (52 per cent) of the 645 respondents were fully supportive of the phased withdrawal proposal, whilst a further 30 per cent supported the proposal but expressed views on alternative approaches and 18 per cent opposed it.

The alternative approaches included guaranteeing a contribution period where the employer contribution rate would not rise, maintaining current employer contribution rates and offering a defined contribution scheme for independent schools.

Almost three-fifths (58.9 per cent) of respondents fully agreed that phased withdrawal from TPS could help independent schools to manage financial pressures, while 18.4 per cent partially agreed and 22.7 per cent disagreed.

More than two-thirds (69.4 per cent) agreed that the phased withdrawal proposal would protect teachers currently participating in the TPS at an independent school, with a further 14.4 per cent partially agreeing and 16.2 per cent stating that it did not offer much protection.

Respondents’ primary concerns were that the change could result in more independent schools leaving the TPS as it could appeal to schools looking to save money when employing new staff, and that phased withdrawal could set a precedent for the higher education and further education sectors.

Some also worried that the change could fail to protect members who moved to other schools or have a negative impact on the ease of movement for teachers between the state and independent schooling sectors.

The department said it believed that “overall, the phased withdrawal proposal is likely to result in more teachers at independent schools retaining TPS membership than if the proposal was not implemented”.

The Department for Education said its next step would be to liaise with the Independent Schools Council, as well as member and employer representatives, to fully develop the proposed change and draft regulations to allow phased withdrawal for independent schools.

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