Effect of Pension Changes on Independent Schools
Whilst the changes to employers’ contributions to the Teacher’s Pension Scheme (TPS) will present all state-maintained schools and further education establishments with a budgetary induced headache, its immediate impact will be most keenly felt in the independent school sector.
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With employer contributions rising from 16.4% to 23.6%, budgets are going to come under even greater scrutiny, at a time when challenges faced by the independent sector are multi-faceted. This rising cost creates something of a dilemma for proprietors. The ultimate solution may be to withdraw from the TPS altogether although, whilst simple to suggest, withdrawing is not without its costs and complications to implement.
In the short term, schools will be faced with the challenge of maintaining an attractive pension provision, which has long been integral to their ability to recruit and retain teachers of high quality, whilst balancing the budget.
Economic theory would suggest that increasing costs are passed onto the consumer, at least in part. This does not necessarily hold true in the independent school sector, where there is already significant sensitivity around fees, and families have the option to change school or withdraw from independent education altogether.
However, the maintenance of positive budgets has considerable impact on the ability to re-invest into school facilities and services, whilst also pacifying the banks, and is ultimately the determining factor to value, should proprietors seek to dispose of their interests.
If the ability to make a budget surplus is further impeded, we may see an increase in the pace of closures and the amalgamation of independent schools. Despite this and other external pressures such as wage increases, and political uncertainty with Brexit and the prospect of a General Election and / or a second referendum looming, the Education market is showing a remarkable level of resilience. Interest and activity continues to be strong as we reach the halfway point of the year, with buyer activity both domestically and internationally showing no signs of abating.
This and many other topics which impact on the independent schools sector are sure to be discussed at the ISA Conference in Eastbourne on 16th – 18th May, which Christie & Co are delighted to be sponsoring. The event will provide a great opportunity for providers, owners, and operators to share insights and advice on the biggest opportunities and challenges ahead for independent education.