With all the negative press surrounding pensions shortfalls and the requirement on the part of the employer to make pension provision available pretty much across the board, it is understandable that the potential pension responsibilities of an academy will be an important part of the conversion decision-making process.
Teachers and staff of the school who are retained by the academy will be affiliated with either the Teachers Pension Scheme (TPS) or the Local Government Pension Scheme (LGPS). When it comes to managing the teachers pension arrangements, little involvement is required on the part of the academy, apart, of course from making the employer’s contributions and making sure that all information relating to the pension is kept up to date. Arrangements for support staff pensions on the other hand are somewhat more complex.
To ensure compliance with support staff requirements, academies will be required to register with the LGPS to become a scheduled body employer. This process means that they will become responsible for:
- Year-end certification; and
- Updating of pensions information.
From the scheme member’s point of view, in the case of retained staff, their membership will be unaffected. New joiners, who are eligible to join the scheme will be automatically enrolled, with the obligatory opt out option if they give notice within a 3 month period.
Although the option to pay into private pension schemes exists for academies, it is relatively uncommon.
When it comes to fulfilling your pension obligations as an academy, it’s important to be aware of the risks that could lie ahead. Once again, in this regard, the TPS is relatively low risk from the academy’s point of view and really only requires an understanding of obligations and timely responses. When it comes to support staff, the academy has both wider reaching responsibilities and a higher level of risk. From a management point of view, it may well be decided that actuarial assessments are required by the academy in order for them to manage their pension risk position effectively. This will of course incur costs.
More significantly however, because academy support staff employer contributions are subject to increase, this leaves the academy potentially exposed to higher costs. The fact that the LGPS is a funded pension scheme means the associated risks to the academy become even greater. With widespread pension deficits, more and more employer contributions are being increased to meet shortfalls and make provision for future commitments. It is clear that this situation poses a potentially significant risk to the academy.
When it comes to pension administration, it is the responsibility of the academy to administer all payments, either in-house or via their payroll provider. It is for all these reasons, and more, that when converting to academy status the current and future pension arrangements are carefully considered in the decision-making process.
If you would welcome some guidance on the pensions situation when converting to an academy, why not get in touch?