The chief executive officer of the Independent Schools’ Bursars Association (ISBA) has said the Teachers’ Pension Scheme (TPS) is a “here and now issue”, even for schools that have been adopting a ‘wait and see’ approach.
David Woodgate, who heads up the national association representing bursars and business managers of independent schools, addressed school leaders yesterday (25 November) at the Independent Schools Conference.
Schools in the TPS faced a 43% increase in employer contributions from 1 September 2019. Woodgate said schools are now facing up to the “increased burden” of the TPS – noting both the TPS and Covid-19 as “catalysts for change”.
“This term we have been inundated with large schools, HMC schools, GSA schools, saying we have to now face up to the inevitability of consultation on whether to pull out of TPS,” said Woodgate.
“That is driven by the affordability equation now and the emerging inevitability of future rises in employer contributions, particularly as we are in depressed economic circumstances.”
He continued: “Three independent firms of actuaries have said it is likely that employer contributions will go to 30% from 2023 and if we get negative interest rates, and the impact that has on the discount rate, don’t rule out a 35% employer contribution, which is quite an eye-watering level of contribution.”
This is a future-proofing issue for schools. Schools are really putting the way they do business under the microscope and challenging a lot of givens – David Woodgate, ISBA
There are now 199 schools that have withdrawn from the TPS or given notice to do so, with one more coming in at Christmas, Woodgate revealed.
“Boards of governors on a school-by-school basis need to consider whether to consult, and – if the outcome is to withdraw – what option for replacement pensions they should consider,” said Woodgate.
He said the TPS and financial threats were stimulating debate in schools, which is making more mergers likely.
“This is a future-proofing issue for schools. Schools are really putting the way they do business under the microscope and challenging a lot of givens.”
Woodgate said some of the other ways school bursars can future-proof their schools are sweating their assets to maximise income and making sure governance is robust and effective (he advised visiting AGBIS for advice on the latter).
“The schools that emerge will be stronger, fitter, better able to face up to the future. Improving the way in which we scenario plan, the way we do sensitivity analyses and the way we can do risk management in schools is critical. We should now really be looking to the next decade, not to the successes of the last century,” added Woodgate.