Traditionally, a significant proportion of independent schools have also been members of the TPS, paying the same rate as state schools, but with no equivalent TPECG the 2019 rise hit them hard, and many responded by leaving TPS. A large percentage of independent schools have already left, and others are carefully considering their position and nervously looking towards the forthcoming rate change from 1 April 2024.
The TPS remains in significant deficit. It is one of the largest ‘unfunded’ public sector pension schemes. ‘Unfunded’ means that although employers and employees pay contributions, these go directly to the government, and, crucially, the amount does not cover the full cost of paying pensions. The large annual shortfall has traditionally been met by government borrowing.
The deserting independent schools have placed additional strain on the TPS, and even back in 2020 rumours began suggesting that employer rates could rise to as much as 30% in 2024. This would represent a further 27% rise, and would mean that combined with the last rise the increase from the old 16.48% rate would be a whopping 82%!
Academies are therefore currently in a difficult position when it comes to budgeting for April 2024 and beyond. There would be hope that any rise in rate would be accompanied by a new TPECG, but there is no guarantee this could come, especially this grant is currently paid as part of core GAG funding. TPS issued a statement on their website in January 2023 saying:
“…….There’s been a suggestion that the employer contribution rate will rise significantly in 2024. At present it’s impossible to know what the results of the 2020 scheme valuation will be and what affect that could have on contribution rates, whether it be a rise or drop. It’s likely that we won’t have confirmation on this until at least late 2023 at the earliest, but we’ll let you know as soon as possible to better prepare you.”
It therefore seems likely that there will be no confirmation of the post-April 2024 rate until very late this year, or possibly early 2024. This is not particularly satisfactory and will not give academies time to plan and prepare.
The next step
If you have any questions about the above article, or questions on academy pension requirements in general, please contact your usual UHY adviser, or use the contact form below.
