4. Examine closely the alternative to TPS

Make sure any replacement pension scheme offers your people more options.

Choices employees are offered for paying their pension contributions require careful consideration.

Where scheme rules permit, there's much to choose from and the benefits and/or savings between them can be substantial for both school and staff.

How can you ensure you're making an informed choice?

The table on the next page shows five different ways to slice the same employee pension contribution and the associated tax relief and national insurance (NI) contributions, each with a very different outcome.

If this was your own pension contribution, which option would you choose?

Employee contribution	Method	Amount invested in pot	Employer NI savings ²	Employee NI savings ³
£1,000	£1,000 deducted from gross pay or £800 deducted from net pay + £200 basic rate tax relief.¹	£1,000	£0	£0
£1,000	£1,000 salary sacrifice. Employer and employee keep their NI savings.	£1,000	£150	£80
£1,000	£1,000 salary sacrifice. Employer keeps their NI savings. Employee reinvests their NI savings in their pension.	£1,080	£150	£0
£1,000	£1,000 salary sacrifice. Employer reinvests their NI savings in the pension. Employee keeps their NI savings.	£1,150	£0	£80
£1,000	£1,000 salary sacrifice. Employer and employee reinvest their NI savings in the pension.	£1,230	£0	£0

Salary sacrifice may be more valuable for many teachers and schools during the 2022/23 tax year due to the proposed increase in national insurance contributions.

Notes

1. Assuming the employee is a basic rate taxpayer entitled to 20% tax relief (25/26 tax year).

2. Assuming the employee’s sacrificed earnings are all subject to 15% employer NI contributions (typically earnings from £417 a month, 25/26 tax year).

3. Assuming the employee’s sacrificed earnings are all subject to 8% employee NI contributions (typically earnings between £1,048.01 to £4,189 a month, 25/26 tax year).

Why doesn’t everyone use salary sacrifice for pension contributions?

In some cases, there are concrete reasons for not doing so - the TPS, STPS, and STSS do not allow salary sacrifice.

Some employers think salary sacrifice is costly to introduce, but in our experience, most set-up costs can be quickly recouped from their NI savings.

It's one of the key areas we recommend you check as part of a feasibility exercise before deciding if it's right for your school, because the largest benefit is realised by using sacrifice for pension contributions.

The arrangement can generate employee savings, control costs and help employees boost their retirement.

We've been helping independent schools make informed decisions for decades.

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How we support and advise on pensions

Governance is key

A sound governance structure can mitigate risks, avoid costly litigation and enhance efficiencies.

It can also help towards good outcomes for schools and staff alike by bringing clarity and simplicity to a topic many find complicated.

Range of retirement services

With greater choice and freedom in how and when people can access their pension funds, there is now an even greater need for early guidance and advanced planning.

Our dedicated retirement services team does just that.

Investment support

Our investment research division analyses and rates over 18,000 investment funds available to DC pensions.

This insight supports our clients’ investment objectives, by regularly monitoring that they're on track to deliver.

Financial education and wellbeing

Our financial wellbeing and education service helps schools explain finances and their implications to staff, helping them make better financial choices at all stages of their working lives.

Health and protection

Secondsight takes a consultative approach to helping our clients find the right mix of benefits for their staff.

Deep knowledge combined with our disciplined consulting approach makes us an ideal partner.

We provide a range of advice and solutions, including protection and health brokerage solutions, life and disability claims management, and health care provider performance measurement.

Pension company and default investment strategy selection

We research, evaluate and assess the capabilities of UK pension providers in detail to understand more closely what they offer.

This includes master trusts, which increasingly seen as a potential replacement for trust-based DC schemes, where additional regulatory requirements are becoming more onerous.

Ongoing consultancy

Our ongoing consultancy service ensures clients are kept up-to-date with legislation and are able to manage regulatory change as it evolves.

Auto-enrolment support

Our clients are busy and need straightforward, uncomplicated support to help them run an effective employee pension scheme. Having helped hundreds of employers to successfully complete their auto-enrolment projects to comply with complex legislation. Our teams support employers to remain compliant and up-to-date.