Support-staff pensions cost academies thousands

21st October 2011 at 01:00
Converters are hit by obligation to fund local authority schemes

It was meant to give them a clean break of independence. But many schools converting to academy status have unwittingly found themselves facing bills of hundreds of thousands of pounds to pay the pensions of support staff.

Schools that have opted to become academies are facing bills of up to #163;800,000 after assuming responsibility for the local government pension scheme that covers teaching assistants, admin staff and lunchtime supervisors.

By converting, academies must, as employers, adhere to a plan to reduce their deficit or risk being in breach of the pension fund. It means many academies have to find additional money from their budgets to pay more into the pension pot.

The Department for Education says it is aware of the issue but as yet has no clear plan for how to resolve the problem. In the meantime, the situation is likely to become more problematic as the value of support staff pensions is linked to share prices, which are currently suffering due to the economic climate.

Malcolm Winston, an accountant with chartered accountancy firm UHY Hacker Young, who has advised a number of academy converters, said many schools believed they would take on clear balance sheets when they made the switch.

"But what actually happened was they ended up with deficits of up to #163;300,000," Mr Winston said. "It has become worse, particularly this year, as pensions are invested in shares which are currently going through the floor, so the deficits increase - #163;300,000 becomes #163;800,000.

"Over the next couple of years, shares could keep falling through the floor and those deficits could possibly double again. Technically speaking, you could say the academies are insolvent."

A deficit of #163;800,000 equates to around 15-20 per cent of the budget of a 1,000-pupil school.

According to Brian Lightman, general secretary of the Association of School and College Leaders, the prospect of a deficit of that size has been a "major deterrent" to many schools converting to academy status.

Although the deficit does not have to be paid in one sum, Russell Hobby, general secretary of heads' union the NAHT, said the cost of servicing such a debt will have an impact elsewhere in school budgets. "Schools will have to come up with a workable plan to pay off the deficit over, say, a 10-year period," Mr Hobby said. "But if some schools have deficits of around #163;800,000 then that will be the equivalent of a teacher's salary coming from somewhere."

And Mr Hobby was not confident that the Government would be able to produce additional funding to allow academies to pay off the debt. "I don't see how they can afford it," he said. "If anything, I think the money is likely to go down - where will the money come from?"

Mary Bousted, general secretary of education union the ATL, said the fact that academies have to take on the pension liabilities of support staff was "extremely serious".

"It will affect every school that becomes an academy. Did the support staff know when the school converted that their pensions would be taken on by the school?" Dr Bousted said.

The issue of additional funding is particularly pertinent as education secretary Michael Gove has said he does not want academies to be financially better or worse off than local authority-maintained schools.

Kingsbridge Community College in Devon recently converted to academy status, and its head Roger Pope said taking on the pension liability was the "calculated risk" of converting.

"We were very well aware of what we were taking on - that if there is a deficit we would have to increase our contributions to reduce that deficit," Mr Pope said. "The Government has said it will not underwrite the deficit, but we took the calculated risk that it would be unlikely the Government would allow their academies to go bankrupt."

The DfE said it was "committed" to making the pension scheme fair for academies and their staff, but there is still no clear strategy from Whitehall. "We are clear that academies should not incur unfair extra costs and are currently working with officials at the Department for Communities and Local Government to identify ways we can alleviate the issues some Academies are experiencing," a spokesman said.


#163;80k - Shortfall being faced by some academies to pay pensions of support staff

#163;70bn - Estimated overall shortfall faced by local government pension schemes

#163;1.65bn - Birmingham City Council deficit, one of the largest in the country.

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