Employer rate for TPS to fall significantly to 17.68%

The Government has now announced the results of its latest valuation of the Teachers' Pension Scheme (TPS) and the employer rate is scheduled to fall significantly from 28.68% to 17.68% with effect from 1 April 2027.  This has been driven changes in the SCAPE discount rate.

The reduction will be especially welcome news for those independent schools which still remain in the TPS, given the financial pressures the sector is currently under. Where those schools have implemented hybrid arrangements (involving staff taking a pay cut to stay in the TPS) most should still be able to benefit from part of the savings in the employer rate once the pay cut has been reversed. However, it will be important to check the precise contractual wording used in each case.

Due to the surprise reduction in the TPS employer rate, many independent schools will now also find themselves in the unexpected position of contributing more to the alternative defined contribution (DC) schemes they have set up than the TPS. However, this may be a temporary phenomenon with actuaries speculating that future valuations could see the rate start to climb again. Schools should therefore review their arrangements strategically from a long-term perspective, noting that any changes to current arrangements would likely require further consultation with staff.