Current and future membership of the Teachers’ Pension Scheme in independent schools
The number of independent schools that have withdrawn from the teachers’ pension scheme (TPS) since April 2019 now exceeds 400, based on a freedom of information request obtained by Moore Kingston Smith Financial Advisers Limited on 19 March 2025.
The latest data from the Department for Education (DfE) shows that:
- 579 independent schools remain in the TPS;
- 401 independent schools have withdrawn from the TPS since April 2019;
- 272 independent schools have introduced, or have given notice to introduce phased withdrawal from the TPS (closing the TPS to new teaching staff).
Of the 579 independent schools remaining in the TPS, a significant number have introduced a defined contribution (DC) pension scheme alongside the TPS (usually referred to as a ‘hybrid’ or ‘total pay and benefits’ model). This is either to manage overall employment costs or to offer teaching staff a more flexible remuneration package.
Many independent schools remaining in the TPS have asked teaching staff to accept a pay reduction, pay freeze or reduced salary award to remain in the TPS, designed to offset the increased costs of providing the TPS. Alternatively, teaching staff can choose to join the school’s DC scheme. Teaching staff participating in the DC scheme often benefit from a higher salary but a lower employer pension contribution, compared with the current 28.68% TPS employer contribution. However, the DC scheme employer contributions are usually significantly higher than the average employer contribution rates in other sectors.
Changes from April 2025
TPS employee contributions
Following a consultation by the DfE, employee TPS contribution rates will change on 1 April 2025. This means that, in many cases, teachers’ monthly contributions will increase and their net pay will fall from April 2025.
Due to high levels of inflation in the UK, the salary bands used to determine TPS employee contribution levels increased by 10.1% in 2023 and 6.7% in 2024. Salaries have not increased by this amount, so scheme funding from employees is not currently meeting the required average of 9.6% of pensionable salaries.
TPS employee contribution rates are changing as follows:
From 1 April 2024 to 31 March 2025
From 1 April 2025
The way in which TPS pension benefits are calculated is not changing, so it’s worth emphasising that the increased employee contributions will not result in an enhanced pension.
Increase in employer NI
Independent schools that have implemented a hybrid pension model for teaching staff typically allow those enrolled in the DC scheme to choose a lower employer pension contribution in exchange for additional pay. Schools are required to pay employer NI on the additional pay, whereas employer pension contributions are currently exempt from employer NI. Independent schools therefore typically deduct the additional employer NI costs from the additional pay before it is paid to teaching staff.
From 6 April 2025, the rate of employer NI will increase to 15% from 13.8%. so schools will need to ensure that NI adjustments to any additional pay are amended accordingly. The NI changes will also increase the savings available through DC pension salary sacrifice arrangements.
TPS: More change to come for independent schools
The latest DfE data on TPS membership is a snapshot in time. It doesn’t capture schools that are currently consulting with their staff on proposed changes to pension arrangements, or others that have plans to do so. At Moore Kingston Smith, we speak to independent schools every day and know that workplace pension arrangements and other employee benefits are continuing to evolve.
The next TPS valuation is due to be published in 2026, with any increases in the employer contribution rate becoming effective in 2027, and this is likely to be a focal point for further change.
Other financial headwinds facing the sector are strong and implementing changes to workplace pensions will become more difficult due to the new Employment Rights Bill. Against this backdrop, it may be advantageous for schools to bring forward any planned changes to 2025, rather than waiting for the next TPS valuation results.
In the meantime, good communication with staff on school finances is important, as too is education on pension and personal financial matters. With teachers in the independent sector increasingly accruing a mixture of TPS and DC pension benefits, proactive engagement, supported by the employer, is key to achieving better outcomes at retirement.
Help from the experts
Moore Kingston Smith Financial Advisers Limited can help independent schools review their pension and other employee benefit options. We also host staff presentations and one-to-one information and guidance sessions for employees.
Please do not hesitate to get in touch with us if you would like to discuss your school’s pension and employee benefits, or if you would like a copy of the latest TPS independent school membership data from the DfE.
