The challenges independent schools face in sustaining membership of the Teachers’ Pension Scheme (TPS) are well known. Governors are under pressure to balance the total reward they want to offer teachers with the rising and unpredictable cost of TPS.
Add to that the financial strain of VAT on school fees (introduced in January 2025), employer National Insurance (NI) contributions rising to 15% since April, and the potential loss of business rates relief. So, it’s no surprise that since 2019, 405 schools have exited TPS, with 297 opting for phased withdrawal.*
Written by Matt Dorrington, Senior Consultant at Broadstone and
Gemma Woodhouse, Partner at Penningtons Manches Cooper LLP
What are your options?
The options available to you remain largely unchanged. Schools can:
- Exit TPS entirely.
- Adopt phased withdrawal.
- Offer a hybrid model, where teachers choose to stay in TPS (often at personal cost) or move to a Defined Contribution (DC) pension plan.
What are the risks?
TPS remains a highly valued benefit for many teachers. Any change can affect morale, retention and relationships between teachers and the school. As a trusted partner to many independent schools, we understand the emotional, financial and operational impact of pension changes — and the importance of getting it right. All parties need to understand the risks and challenges before entering conversations or a guided consultation process.
Whilst it’s always hoped staff will voluntarily agree to changes through a consultation process, this can be unlikely because many believe TPS is a significant benefit which should not be lost.
The Employment Rights Bill, currently under parliamentary consultation, adds complexity. It sets out expectations for how employers must manage changes to benefits and pensions. If staff don’t agree to changes to their terms and conditions voluntarily, schools may need to dismiss and re-engage staff on new terms; a process that carries legal, reputational and emotional risks.
Staff may argue that any change amounts to a breach of contract, which can lead to discontent and low morale. There may also be wider implications for the school community. Dismissal and re-engagement can trigger trade union activity, industrial action, and formal recognition requests.
Even with a full and proper consultation process, schools still face risks. These include negative publicity, trade union involvement, and low morale among staff. There’s also the potential for employment tribunal claims, especially if staff believe the consultation was flawed or the business case wasn’t strong enough.
That’s why it’s important for schools to seek appropriate advice, communicate openly and transparently with staff, explore all available options, and meet their legal consultation obligations.
What should schools do?
A consultation process increases workload for senior management and inevitably causes disruption among the workforce and school community. However, this is favourable over an approach that does not properly vary an employee’s contract.
Consultation is essential, not just legally, but ethically. Schools must communicate openly, consider all options, and take expert advice. A poorly managed process can leave staff entitled to TPS even if the school has exited, creating significant financial liabilities.
Who can we help?
Employee benefit consultants like Broadstone and employment law specialists like Penningtons Manches Cooper LLP can help schools navigate the complexities of pension change, from strategic planning and risk assessment to consultation and implementation. We understand the sensitivities involved and work closely with governors and senior leaders to ensure decisions are well-informed, legally compliant, and communicated with clarity and care.
*Source: FOI request to DfE, July 2025.
