Independent schools’ TPS contributions reduction ‘welcome news’ for many schools
Pensions & benefits DB pensions
Contributions to the Teachers’ Pension Scheme (TPS) by independent schools, universities and colleges are set to reduce by 11% of salaries following the publication of the results of the 2024 valuation of the TPS.
On 1 July, the Government announced that employer contributions to the TPS will reduce substantially - by 11% of salaries, from 28.68% of salaries to 17.68% of salaries - from 1 April 2027.
Whilst there are a number of factors underlying the contribution rate, the key driver for the reduction is a change in the SCAPE discount rate (which was announced in May 2026).
The reduction in TPS contribution rates will be welcomed by many education establishments who had seen their contribution rates more than double from under 14% of salaries to almost 29% of salaries over the past decade.
Those schools who have taken action to mitigate some or all of the previous increases in costs may need to review their arrangements in light of the material decrease in the TPS contribution rate.
Richard Soldan, LCP Partner and Head of LCP’s charity and not-for-profit advisory team, said “Whilst we had anticipated a reduction in the TPS contribution rate, the reduction is much larger than many had hoped. The reduction will be welcomed by many schools whose finances have been stretched in recent years by the previous contribution rate increases, higher energy costs and the imposition of VAT on school fees.”
Andy Thompson, LCP Partner, said “Independent schools have struggled with successive increases to TPS contribution rates in recent years and many have already made the tough decision to leave the TPS due to uncertainty and affordability constraints.”
“Schools that have previously taken action to limit their exposure to the TPS (for example by setting up a parallel DC pension scheme or exiting the TPS entirely) will need to consider how they will be affected. They will need to review previous changes to understand any potential impact on reward and should consider whether their current DC contribution rate structures remain appropriate.”
