Teachers’ Pension Scheme analysis

Changes affecting survivors' benefits and phased withdrawal of independent schools now in force

On 8 July 2021, the Department for Education (DfE) published its response to its consultation on draft amendments to the Teachers’ Pension Scheme (TPS) regulations. The draft amendments were in respect of two areas, at a high level:

• 1) a change to equalise survivor benefits between same sex couples, following the decision of the Employment Tribunal in Goodwin v Secretary of State for Education, Case Number 1308505/2019, and
• 2) a change to participation rules for independent schools to allow phased withdrawal, announced in November 2020.

The consultation ran from 7 April 2021 to 1 June 2021 and the DfE decided to adopt the amendments as drafted with minor tweaks to ensure consistency in the regulations. Respondents (independent schools, academy trusts and individuals, employer representatives) on the whole, supported the changes. The Teachers’ Pensions (Miscellaneous Provisions) (Amendment) Regulations, SI 2021/805 (New Regulations) came into force on 1 August 2021 and remain law. Gillian McCue, a legal director at Blake Morgan LLP, considers the changes and the implications for the TPS, its employers and scheme members.

What was the outcome of the consultation?

Survivor rights

Survivor benefits equalised for all members of the scheme who are in a marriage or civil partnership, whether active or retired.

Phased withdrawal of independent schools

Independent schools in England and Wales, which are accepted schools, can opt out of TPS participation for future employees while allowing existing staff to remain as active members.

What are the implications?

Survivor rights

• The Local Government Association (LGA) requested clarification about the effect of the survivor benefit changes on those female members who were awarded premature retirement compensation by their employer and whether guidance will be issued for employers which may be affected. DfE will liaise with the LGA over the approach to notifying all employers where this scenario is identified by the scheme administrator.
• The DfE recognises that there may be a small number of cases where female members were awarded discretionary premature retirement compensation by their employer. Where entitlement to a survivors’ pension has been created in respect of such a person following the Goodwin case where there was previously no entitlement (because there was previously not sufficient qualifying service for survivor benefits), there may also be an entitlement to a proportion of the discretionary compensation, which is payable by the employer to survivors in cases where the member has died while in receipt of such compensation.

Phased withdrawal of independent schools

• Potential impact on teachers moving between sectors. Schools and teachers need to think about the overall package on offer.
• The impact of opting out of the TPS at a phased withdrawal school will need to be carefully communicated and there needs to be clarity for members who lose access to the scheme about what happens to their accrued TPS benefits.
• Concerns around employers inducing opt-outs of the current workforce and changing conditions through the dismissal and re-engagement of staff on different terms.
• Independent schools joining the TPS need to provide a guarantee in respect of member and employer contributions, although those independent schools already in the scheme at the time that those requirements were introduced did not have to do so retrospectively. A guarantee ends when an accepted (fully participating) school ceases to be an accepted school. To avoid confusion regarding the status of the guarantee for an accepted school, this will be known as a Type A guarantee in the New Regulations. A separate guarantee, Type B, has been created and will apply to an accepted phased withdrawal school. The same guarantee arrangements that applied to an independent school when it was an accepted school will apply if it becomes a phased withdrawal school.
• How will the McCloud v Ministry of Justice [2018] EWCA Civ 2844 judgment, which will create additional liabilities, be dealt with? Will phased withdrawal employers be liable as well?
• Schools leaving the TPS are also likely to want to leave the LGPS (the scheme for their support staff) and in that scheme there likely will be an exit debt to pay thereby raising further affordability issues for schools.
• Finally, you might be wondering how the changes impact academies. Although academies, in line with independent schools, can set their own pay and conditions currently they are under a statutory obligation to join their teaching staff into the TPS (and support staff into the LGPS). Therefore, they cannot make use of phased withdrawal as the regime stands currently.

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