Education Matters – March 2026

10 March 2026 / Insight posted in Articles

Welcome to the latest edition of Education Matters, our newsletter written specifically for the education sector.

Please get in touch if you would like to discuss any of the articles in more detail.

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Introduction

By Anjali Kothari, Head of Education, Moore Kingston Smith

As always, I am amazed at what an incredible year it has been. VAT on fees, rate rebates disappearing and unprecedented merger and acquisition activity – all against the backdrop of pupils leaving the UK. I don’t know of another sector that has had to deal with so much in such a short space of time.

Sadly, and as expected we have lost some well-known historic schools in the process. I have heard many arguments justifying the closure of these schools, ranging from financial mismanagement and unsustainable pupil numbers to general decrease in demand. I am sure there is an element of truth in many of these stories, but I find very little being reported on the wider impact the closure of these schools is having on their communities. Many of these schools sat in villages and towns where they were the biggest employers in their local area, creating tight-knit communities that have now been dispersed. They brought a bit of the wider world into their communities through international students which always breaks down barriers and fuels a more tolerant society. These schools were far more than educational institutions.

But with every door that shuts another one opens and there are always opportunities. The schools that remain have become stronger and have increased their pupil rolls, showing us that the demand for independent education still exists. But schools cannot take this demand for granted. They cannot assume that parents will have a tolerance for fees continuing to increase and therefore schools, like every other sector, must focus on managing cost structures more effectively.

AI has also become a major talking point and it is a genie that cannot be put back into its box. Schools are at different stages in their journey with IT and AI, but the efficiencies and opportunities they offer cannot be ignored. This is a world that everyone is having to embrace and the impacts will be far reaching. AI is creating a revolution for change – there are jobs that have not yet been created and others are becoming redundant. The education sector no doubt will be a key player in shaping the use of AI for the next generation and to enable schools to be successful the investment in the right infrastructure will be incredibly important.

It would be remiss of me not to mention the changes relating to the new SORP. Schools must consider leases that need to be brought onto the balance sheet, Tier accounting and changes to the Trustees’ Report. For some schools your reporting may change significantly and so you need to be prepared. Make sure to follow our updates as they come out during the year.

The world is changing so fast and while this newsletter touches on many of today’s topical areas, I suspect next year’s newsletter will be dealing with a completely different landscape.

Can your reserves survive with your existing investment strategy?

By Andrew Blair, Partner, Head of UK Private Client and Charity Business Development, Brown Advisory

Independent schools with charitable status are facing a convergence of financial pressures that make the sustainability of reserves more important than ever. We hear anecdotal evidence from schools suggesting that inflationary pressures on their business models are higher than the headline Consumer Price Index (CPI). We believe costs are concentrated in areas such as staff salaries, pensions and facilities maintenance, which tend to rise more quickly than the broad basket of goods and services captured by CPI. This increase acts as an invisible tax on reserves and steadily erodes purchasing power. Against this backdrop, trustees must ask whether their current investment strategy can both protect and grow reserves to ensure the school’s long‑term resilience.

browns financial graph

Balancing growth and income

A fundamental challenge is achieving the right blend of income and capital growth. Unlike pension funds that can reinvest their income, most schools rely on investment income to fund annual operations. This means portfolios must generate sufficient cashflow today while still delivering long‑term growth so future beneficiaries are not disadvantaged.

Heavy tilts toward high-income assets may provide stability but risk insufficient long‑term returns. Conversely, a growth‑centric portfolio may require drawing on capital to meet annual spending, jeopardising the fund’s longevity. The right balance depends on a school’s reliance on investment income, its spending commitments and time horizon. For example, a school funding annual bursaries may prioritise income, whereas a larger school endowment with a multi‑decade outlook may lean toward growth assets.

Defining clear objectives

To navigate these trade‑offs, trustees should establish clear investment objectives, including a realistic target return that reflects inflation and the school’s spending policy. Typically, many aim for a CPI +3/4% to preserve and grow capital after withdrawals – an increasingly challenging target in an inflationary environment. Achieving it may require more risk, greater diversification, or the introduction of new asset classes.

Time horizon, liquidity needs and risk tolerance must also be explicitly defined. Schools with long‑term reserves can include more equities or less liquid assets, while those with short‑term obligations need access to capital on demand. Liquidity is critical: strong returns are meaningless if funds aren’t available when required. Values‑aligned or sustainable investment considerations can also be incorporated at this stage.

Inflation: A stress test for strategy

The recent spike in inflation has been a wake‑up call. Positive nominal returns may still translate into real losses if inflation is higher. Cash and very short‑term assets, once seen as low‑risk havens, have lagged inflation, effectively shrinking reserves.

With markets volatile, school’s trustees may be cautious about taking on additional risk, but the cost of being overly conservative is now materially higher. This environment calls for a strategic review: reassessing return expectations, evaluating whether the portfolio is diversified enough, and ensuring each asset meaningfully contributes to growth or income. A more proactive stance may be needed if inflation remains structurally elevated for longer.

Embracing a total‑return approach

In high‑inflation periods, the distinction between income and capital becomes less helpful. A total‑return approach – focusing on overall return rather than just income – gives schools the flexibility to use both interest/dividends and a portion of capital gains to fund spending.

This mindset broadens the investable universe. Growth‑oriented assets with lower yields, such as global equities, become more viable. However, trustees must set a prudent, sustainable withdrawal rate in order to preserve capital in real terms.

Diversification, real assets and alternatives

Strategic asset allocation remains the primary driver of long‑term returns. A well‑diversified mix of equities, bonds, property, infrastructure, and other real assets can offer both growth and inflation‑linked income. Rising interest rates have improved the attractiveness of high-quality bonds, though they should complement, not replace, growth assets over the long term.

Importantly, many schools are also exploring alternatives such as private equity, private credit, and hedge funds. Private markets can provide higher long‑term returns and diversification benefits, but they come with higher fees and limited liquidity. Allocations should therefore be carefully sized and aligned with goals.

Time for a strategic review

Given the evolving economic landscape, now is an ideal moment for trustees to stress‑test their investment strategy. Are return targets still achievable? Is the portfolio efficient, diversified, and aligned with spending needs? Does it properly account for inflation risk?

A resilient strategy will balance today’s operational demands with tomorrow’s obligations: combining diversified growth, disciplined spending, and regular reassessment. The central question – can your reserves survive? – is both a warning and a call to action. By ensuring an investment strategy is fit for purpose, schools in this sector can safeguard their mission and support education for future generations.

The updated SORP, FRS 102 and the new Charity Governance Code

The updated SORP, the revised FRS 102, and the new Charity Governance Code mark some of the most significant regulatory changes for charities in recent years. Together, they introduce clearer reporting requirements, strengthened governance expectations, and a greater emphasis on transparency, accountability, and effective oversight. These updates aim to improve public trust, ensure financial reporting remains robust and relevant, and support charity trustees in meeting their responsibilities in an increasingly complex operating environment.

Nonprofit – new SORP and FRS 102

Nonprofit – new SORP and FRS 102 Following the Financial Reporting Council’s 2024 periodic review, the updated Charities SORP was issued on 31 October 2025. It applies to accounting periods beginning on or after 1 January 2026, with the first affected year ends being 31 December 2026 and beyond.

As one of the leading firms advising and auditing charities, we’re already helping clients prepare for a smooth transition. We’re supporting charities with impact assessments, transition planning, and implementation support to ensure compliance and avoid surprises.

Our dedicated Nonprofit new SORP FRS 102 page brings you the latest news, guidance and best practice. We’ll be adding regular updates and FAQs throughout the year to help you prepare with confidence. Click here to find out more.

The New Charity Governance Code!

The New Charity Governance Code The Code introduces eight principles designed to help trustees lead effectively, make informed decisions, and uphold their charity’s purpose. A key addition is the new Foundation principle, which emphasises trustees’ responsibility to understand their charity and duties.

The Code has been simplified into a single version, making it a universal tool for charities of all sizes. While not mandatory, it’s an excellent benchmark for reviewing governance and driving best practices. Click here to find out more.

 

Beyond the chatbot: navigating the era of Agentic AI in independent schools

By William Hyde, Assistant Manager, Digital Transformation, Moore Kingston Smith

Artificial intelligence has rapidly moved past the stage of just being a website you can use to produce funny images and into a phase where an AI agent becomes an integral part of your team. For leaders in the independent school sector, the conversation is currently shifting away from generative AI, the tools we use to draft text or create images, and toward a more powerful evolution known as agentic AI.

From reactive assistance to proactive agency

To understand this shift, it is helpful to look at how most people have used AI up until now. Most of us are familiar with copilots or chatbots. These are fundamentally reactive systems. You provide a prompt, and the AI provides a response. If you want a report, you ask for it. If you want an email draft, you provide the details. In this relationship, the human remains the project manager, providing the brain for every micro-step of the process.

Agentic AI represents a move from assisting to doing – these systems are proactive. Instead of waiting for a step-by-step prompt, the AI agent is given a high-level goal, and it autonomously determines the necessary steps, accesses the required tools, and executes the tasks.

As an example of the differences in a basic generative model, you might ask a chatbot to write an itinerary for a staff retreat, which still leaves you to book venues and update calendars. In an agentic model, you tell the system to organise the retreat within a specific budget. The agent then researches venues, checks staff calendars, negotiates provisional bookings, and presents you with a finalised plan for a single-click approval. In this environment, the AI acts less like a digital encyclopaedia and more like a digital employee. It possesses reasoning loops, meaning it can check its own work, identify a conflict, such as calendar dates that do not work, and correct it before the draft is finished.

Improving productivity in school operations

For many independent schools, this technology is beginning to solve the productivity paradox, where despite better tools, staff seem busier than ever. Agentic systems are moving into back-office roles where data-heavy, multi-step processes traditionally consume human hours. A registrar’s office, for example, could utilise an agent to manage the entire admissions pipeline. The system can monitor incoming enquiries, cross-reference them with school capacity, trigger personalised follow-ups for open days, and flag high-interest families to the registrar without manual data entry.

Similarly, in the bursary, agentic systems can handle straight-through processing. An AI agent receives an invoice, verifies it against a purchase order in the school’s management system, checks the departmental budget, and schedules the payment – only alerting a human if there is a discrepancy. Beyond administration, AI agents can orchestrate complex operations like daily cover. If a teacher is absent, an agent can automatically check availability, update the digital timetable for all affected pupils, and message the appropriate staff members instantly.

Governance and trust

As we grant AI the ability to act rather than just speak, the stakes for governance have never been higher. For independent schools, the transition to agentic systems requires a robust framework built on three pillars:

  1. Human-in-the-loop;
  2. Data sovereignty; and
  3. Clear guardrails.

High-impact decisions, those involving significant financial spend, safeguarding, or sensitive pupil data, still require human authorisation.

The concern over where data goes remains paramount. Many schools are now opting for walled garden or private cloud deployments of these agents. This ensures that the sensitive information the AI agent uses to learn and act, such as financial records or pupil files, stays within the school’s secure perimeter and is not used to train external models. Leaders must define exactly what an agent can and cannot do, setting kill switches and spend caps to ensure the system remains a tool for efficiency rather than a source of liability.

A new era of leadership

The rise of agentic AI suggests that the most valuable skill for school leaders in 2026 will not be prompt engineering, but system design. It is important to become adept at defining clear goals, establishing ethical boundaries, and managing a hybrid workforce of humans and digital agents. The question is no longer whether AI can write an essay or a poem. For the modern head or bursar, the question is which of your school’s most complex, time-consuming workflows can be delegated?

The employee benefits landscape in the independent schools sector

By Tom Breading, Director, Moore Kingston Smith Financial Advisers

With the number of independent schools participating in the Teachers’ Pension Scheme (TPS) reducing, a competitive employee benefits package is crucial to recruit and retain the best talent. Salary is important, but a broad range of employee benefits that meet the needs of your staff are also key.

TPS latest statistics

Based on a Freedom of Information request on the number of independent schools participating in the TPS obtained by Moore Kingston Smith, the latest data as of 27 November 2025 shows:

  • 438 independent schools have withdrawn from the TPS since April 2019.
  • 315 independent schools have introduced phased withdrawal from the TPS.
  • 574 independent schools remain in the TPS.

Of the 574 independent schools remaining in the TPS, many have asked teaching staff to take a pay reduction, pay freeze or reduced salary award to remain in the TPS. This is designed to offset the increased costs of providing the TPS.

Typical benefits packages after a school withdraws from the TPS

A summary of ancillary benefits provided by the TPS for active scheme members and deferred scheme members (staff who have opted out of the TPS, or their employer has withdrawn from the TPS) are provided below:

TPS benefits on death

TPS benefits on ill-health

A group life assurance arrangement is very similar to the TPS death grant. One key difference though, is that the TPS death grant insures the full-time equivalent salary for any part-time members of staff, whereas a group life assurance arrangement typically insures basic salary. Some schools provide a higher multiple of cover to compensate for this, and as a replacement for the dependants’ pension.

A group income protection policy provides the school with regular payments that allow it to offer a replacement income to eligible staff if they are unable to work due to illness or injury.

What other employee benefits are being considered by independent schools?

We are seeing an increased demand for a wider range of employee benefits, particularly those that result in cost savings for staff and in some cases, cost savings to the school.

  • Pension salary sacrifice: generates National Insurance savings for both staff and the school. This is the most efficient way for contributions to be paid into a DC scheme. National Insurance relief will be capped on the first £2,000 sacrificed into a DC scheme from April 2029, but until then, staff and the school will benefit from National Insurance savings on the full amount sacrificed into the DC scheme.
  • Electric vehicle salary sacrifice: considered the cheapest way for employees to lease a new or used electric vehicle and generates income tax and National Insurance savings for staff and for the school. This scheme can also help the school meet its sustainability ambitions. Advice should be sought before implementing this arrangement, as if you provide the TPS, a member of staff’s pensionable salary is reduced if they participate in an electric vehicle salary sacrifice scheme.
  • Phone, tablet, laptop, computer and wearables scheme: employer buys the product and employees repay them over 12 equal monthly payments from salary. The cost of the product is taken from salary before National Insurance is paid, which saves employees 8% or 2% National Insurance.
  • Group private medical insurance: covers the associated costs of private medical treatment in the UK. This can be a very expensive benefit for an employer to provide and is sometimes provided to members of the senior leadership team instead of all staff. Often these policies offer a gym discount and additional services mentioned below. A more affordable alternative might be a health cash plan for staff which helps with day-to-day health treatments with dentists, opticians and physiotherapists amongst others.
  • Dental insurance: allows staff to claim back the associated costs of dental treatment whether NHS or private up to policy limits.
  • Group critical illness insurance: pays a tax-free lump sum to employees if they are diagnosed with a specific condition. The lump sum can be based as a multiple of the employee’s salary or a fixed amount, and the number of conditions can be reduced or increased according to the budget available.

There are typically many additional perks of working for an independent school, which should continue to be promoted, such as free meals, access to the gym and fee discounts as well as many others.

The importance of regularly reviewing your existing employee benefits

We’ve found that many employers are overpaying for their existing employee benefits. Existing policies need to be regularly reviewed to ensure the insurances meet the needs of the school. Some of the issues we’ve encountered are:

  • Eligibility wording: eligibility wording needs to be robust in the event of a claim. If you offer both the TPS and a DC scheme for teaching staff, is the eligibility wording clear to state ‘all teaching staff who are not members of the TPS’. If not, the insurer may be covering all teaching staff, meaning the school could be asked for additional premiums for teachers enrolled in the TPS. This results in teachers in the TPS being provided with double life insurance through the TPS and the group life assurance arrangement. It is important to review these matters before a claim, as errors in the eligibility wording can be costly for the school if a claim is declined.
  • Group life arrangement structure: policy can be structured as either registered or excepted. Claims from a registered scheme can result in a tax charge on the beneficiary, especially in the event of a claim for a higher earner. Excepted schemes are often used for higher earners and do not result in a tax charge in the event of a claim, but excepted schemes are subject to more intricate rules regarding inheritance tax and trust management.
  • Group income protection features: some policies offset the employment support allowance which reduces the level of cover the insurance provides. Also, some policies provide insurance for ongoing pension contributions, which isn’t needed if an employee has opted out of the pension scheme.
  • Accepting existing insurers renewal premium: regular open market reviews should be carried out to ensure that the existing insurers are offering the best value to the school. The insurance market is very competitive and the school may save money by switching insurer on a regular basis.
  • Promoting additional features of existing arrangements: products such as group life assurance and group income protection typically provide additional features that insured employees have access to. The additional features can include an employee assistance programme, access to a virtual GP, second medical opinions and range of other services. Staff are often not aware of these additional benefits, and these should be promoted to ensure they are being utilised and valued by staff.

An employee benefits package does more than support recruitment and retention. It strengthens employee engagement, boosts motivation and reduces sickness absence, while simultaneously helping employers control and, in some cases, significantly reduce underlying costs. In an environment where talent expectations continue to rise, an effective benefits strategy is both a differentiator and a smart financial decision.

Employment Law: 2026 and beyond

By Donal Moon, Employment Law Adviser, Moore Kingtson Smith HRC Consultancy

The Employment Rights Act 2025 received Royal Assent on 18 December 2025, introducing a two-year programme of reforms affecting all employers, including independent schools. With changes phased through 2026 and 2027, schools should start planning for these changes now.

This article outlines the key developments and practical steps that schools can take.

Immediate measures (December 2025)

April 2026 changes

Late 2026 changes (August to October)

2027 Changes

Summary of planning and implementation steps

To remain compliant as these reforms take effect, schools should take the following steps:

  • Audit current payroll, SSP and holiday pay practices ahead of April 2026 changes and FWA enforcement.
  • Review and update all employment contracts, handbooks, and policies to reflect the new rights in stages, in advance of each tranche of changes being introduced.
  • Implement all reasonable steps to prevent sexual harassment in the workplace, including by third parties, following the EHRC recommendations.
  • Review the use of zero hours and casual contracts for staff such as supply teachers, invigilators, and peripatetic music teachers, and prepare systems to track hours and generate guaranteed hours offers.
  • Strengthen probation and performance management processes in readiness for the reduced unfair dismissal qualifying period and removal of the compensatory award cap.
  • Train managers across HR, operations and finance on the new rights and consultation obligations.
  • Update document retention policies to reflect extended tribunal time limits.
  • Review and amend NDAs, removing any clauses that will be void.
  • Establish a monitoring process to track commencement regulations and updated guidance as they are published.

Conclusion

The Employment Rights Act ushers in radical reform with heightened risks for schools. Begin governance and planning now, monitor commencement regulations, and brief managers across HR, payroll, operations and legal as developments occur.

Raising data awareness in modern education

By Richard Jackson, Data Protection Officer, Moore Kingston Smith

The ever-rising cyber risk in the education sector, remains a key concern for educators across the UK. In addition, accidental data breaches continue to rise, with several high-profile incidents occurring in the early weeks of each new school year.

Along with health and social care, education consistently ranks among the sectors most likely to experience a cyber attack or data breach. Several factors make schools prime targets for cybercriminals and contribute to the high volume of accidental data breaches:

  • Valuable personal and financial data: schools process large amounts of sensitive data on students, staff, parents, volunteers, and suppliers.
  • Limited resources: for many schools, budget constraints mean that cyber security and data protection are not at the top of the list of their priorities. As a result, weaknesses can exist in both technical defences and staff awareness, increasing the risk of hacks and accidental data breaches.
  • Home and remote learning: there has been a dramatic increase in the deployment of online learning platforms and cloud-based services, in turn increasing the potential for breaches or attacks.
  • Ease of targeting: cybercriminals target sectors with weaker technical controls, and those where the personal and financial data being processed is worth the time and effort to obtain. Education is unfortunately at the top of that list, alongside healthcare.

Data Subject Access Requests

UK Legislation focuses on specific data subject rights and fundamental principles that underpin best practice and compliance. Personal data is a fundamental, as schools process large amounts of sensitive data on students, staff, parents, volunteers, and suppliers.

A specific trend that we are seeing grow month to month since early 2025, is an exponential increase in Data Subject Access Requests (DSARs) by existing or former employees, and parents, in the education setting. Many schools are becoming overwhelmed by DSARs and rarely have the resources to meet the one-month deadline, leading to non-compliance and complaints to the Information Commissioners Office (ICO).

The right of access (commonly known as subject access), gives individuals the right to obtain a copy of their personal data and supplementary information. This helps them understand how and why their data is being used and verify that it is being processed lawfully.

The ICO received 42,000 DSAR-related complaints last year, with the figure rising annually – demonstrating that effective management of subject access requests is essential in the education setting. Many schools are struggling to meet the legal requirements as set out in UK data protection legislation, running the risks of complaints and subsequent action by the ICO.

UK schools cyber incidents map

A useful resource for understanding the scale and regularity of cyber incidents, is the UK Schools Cyber Incident Map. This interactive tool visualises publicly reported cyber incidents affecting primary schools, secondary schools, and multi-academy trusts (MATs) from 2020 to 2024.

The map reveals the true and ongoing threat to schools and MATs and reinforces the need for educational establishment to prepare for future cyber incidents.

Friday is breach day

In data protection, we often refer to Fridays as breach-day. The vast majority of accidental data breaches or successful phishing attacks occur on Fridays – particularly after lunch and towards the end of the day. A major contributing factor is Friday fatigue: the physical, mental, and emotional exhaustion commonly experienced at the end of a working week.

This is something we emphasise to clients in our human firewall and data protection awareness training, because knowing you have a period of higher risk and incident likelihood, might just prevent the worst from happening.

Research from Texas A&M University School of Public Health, found that: “Employees were less active in the afternoons, and made more typos in the afternoons – especially on Fridays.” This aligns with the most common personal data breaches: sending emails to the wrong recipient(s), or using cc instead of bcc.

Improving work life balance and encouraging regular short breaks, particularly on a Friday can reduce Friday fatigue and lower the risk of accidental data breaches in schools.

Department for Science, Innovation, and Technology: Cyber security breaches survey

The Cyber Security Breaches Survey explores cyber resilience across the UK. It is primarily used to inform government policy on cyber security, making the UK cyberspace a secure place to do business. The study explores the policies, processes, and approach to cyber security, for businesses, charities, and educational institutions. It also considers the different cyber attacks and cybercrimes these organisations face, and how they are impacted and respond.

The survey found that cyber security breaches or attacks in the last 12 months were reported by:

  • 60% of secondary schools;
  • 85% of further education colleges; and
  • 91% of higher education institutions.

They were all more likely to experience a breach or attack than businesses overall (43%).

Further and higher education institutions experienced breaches more frequently (weekly):

  • FE/HE institutions: 30%;
  • Primary schools: 9%; and
  • Secondary schools: 16%.

In addition, 40% of further and higher education institutions experienced a negative outcome from a breach.

The following are examples of recent high-level security breaches

  • Warwickshire school cyber attack
    A school in Warwickshire suffered a cyber attack in December 2025, resulting in its entire IT system being offline.
  • London local authority cyber attack
    A London local authority is still managing the ongoing impact of a cyber attack that took place in November 2025, impacting online applications for school admissions. The application system remains unavailable, with families being asked to submit paper forms instead of online.

Be prepared

The cyber and data protection threat to education remains high, and the new year has brought with it new risks and areas of concern for all educators to manage. AI, student hackers, and accidental breaches continue to cause headlines in the media. At the same time, operational pressures resulting from data subject access requests increase pressure on staff within the school setting.

Leaders and educators must adopt the mindset that it is not a question of if a breach or attack will take place, but when, and that this could manifest not only as a direct attack on their school, but also via their critical supply chain and/or trusted stakeholders. They must also ensure they have sufficient resources in place to manage the increasing volume of data subject rights requests.

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