Scenario 3

School 3 decides to enter a phased withdrawal from TPS. They continue with TPS for existing teaching staff and offer an alternative solution for future teaching and non-teaching staff.

All future eligible teaching staff will be automatically enrolled in the alternative workplace pension scheme, unless they opt out. They will no longer be able to build up benefits in TPS.

Existing teaching staff will continue to contribute to and accrue benefits in TPS.

 

Potential benefits

  • No need for contractual changes or a consultation period for existing teaching staff.
  • No change to the costs of administering the scheme for existing teaching staff.
  • For employees who remain in TPS, the value of their pension benefits at retirement are likely to be higher than those they’d build up in any alternative pension scheme.
  • The school will set employer and employee contribution rates, subject to statutory minimums.
  • The alternative workplace pension scheme can be open to both future teaching and existing and future non-teaching staff.
  • Future employees will have access to flexible retirement options, such as, taking one or more cash lump sums, a regular income with a drawdown facility, or a secure income via an annuity purchase.
  • Employee contributions for future teaching and existing and future non-teaching staff can be deducted on a relief at source or salary exchange basis, meaning a potential for NIC savings. Unlike TPS, the relief at source system would enable employees who earn less than the Personal Allowance to still benefit from tax relief on their pension contributions.

 

Key considerations

  • The government will continue to set the future employer and employee contribution rates and increases to TPS, potentially meaning further increases in the future for existing teaching staff.
  • The cost of administering TPS for existing teaching staff could be higher than other workplace pension options.
  • No potential National Insurance Contribution (NIC) savings for existing teaching staff.
  • No tax relief for those who earn less than the Personal Allowance for existing teaching staff.
  • Contractual changes for future employees will normally be required and the school may incur legal advice costs.
  • Any consultations with an adviser firm may also incur costs.
  • Future teaching staff are unable to join TPS, or retain access if they come from school that offers TPS, which could be a disadvantage when recruiting.
  • The value of future employees’ pension benefits at retirement are likely to be lower than those provided by membership of TPS.