Summer 2015 Academies and Colleges Introduction Interview with Ruth Gilbert Changes to TPS/LGPS Modernising Charity Law The Academy Govern@nce service Strong foundations Academies and Colleges Contents InStep / Academies and Colleges 2 InStep / Academies and Colleges 05 Introduction Introduction by Diane Gilhooley,Partner, Head of Eversheds’ UK and International Education Practice. 06 An interview with... Ruth Gilbert, Career Colleges Trust. 08 Teachers’ Pension Scheme changes A look into the changes to public sector pension schemes over the past few years, including the Local Government Pension Scheme (LGPS) and the Teachers’ Pension Scheme (“TPS”). 10 Modernising Charity Law Overview of the Charities (Protection and Social Investment) Bill 2015. 12 The Academy Govern@nce service The transition from a system of maintained schools under the auspices of local authorities to a landscape comprising charitable companies. 3 14 Eversheds news Up coming training and events. InStep / Title title title Academies and Colleges 4 InStep / Academies and Colleges Introduction Diane Gilhooley Partner, Head of Eversheds’ UK and International Education Practice dianegilhooley@eversheds.com By Diane Gilhooley, Partner, Head of Eversheds’ UK and International Education Practice With the general election out of the way many in schools and colleges will be enjoying the chance for a summer break. No doubt many will have concerns as to what the next academic year may bring, with the prospect of further public spending cuts following the July Budget and the lead in to the referendum on Britain’s continued membership of the EU. With a return to one-party government the direction of education policy over the next five years is clear. We feature articles on three aspects of this. The government considers that its policy making in further education is largely complete and that the onus is now on colleges, working with partners in schools and academies, to take advantage of the opportunities provided by the 2012 governance changes to work with employers to provide learners with the skills the economy needs for sustainable growth. We were delighted to interview Ruth Gilbert, CEO of the Career Colleges Trust, on the part career colleges can play in this regard. The government also believes strongly in the power of students to drive up quality in a competitive HE market place. We also look at the Charities (Protection and Social Investment) Bill. That Bill perhaps exemplifies the new government’s approach – by strengthening the regulatory powers of the Charity Commission but also aiming to increase the ability of charities to undertake social investment. We also feature an article on an issue of perennial importance to education institutions, namely pensions, and introduce our new Academy Govern@nce Service, which will be available from September. I hope you find this edition both interesting and useful. As always I will be pleased to receive your comments on the articles and on any other topics you would like us to cover in future editions. Diane 5 An interview with... Ruth Gilbert, Career Colleges Trust A qualified teacher, Ruth has held a number of roles in further education as well as in the commercial sector. Most recently, Ruth was CEO and Principal of Southwark College and prepared the College for merger to secure a sustainable future. Some of our readers may not be familiar with the concept of a career college. Can you please explain the essential characteristics of career colleges, their corporate structure and how they differ from other 14 to 19 years institutions such as university technical colleges (UTCs) and studio schools? Career colleges are industryspecific and industry-led education institutions. They are only being established for industries with acute and growing skills shortages, such as the digital industries and health care. The development of a career college must start with the industry concerned describing the broad skills and abilities required for young people not only to survive but also to thrive. The aim is to prepare young people not just for their first job in that industry but also for their subsequent careers. An example would be the hospitality and catering career college established by Hugh Baird College. Major employers in that industry, such as Malmaison and Hilton have been involved and the initiative has been fronted by presenters from the Great British Menu television programme. In developing a career college we start with the identification of the necessary skills rather than from the qualifications students will achieve. Core academic knowledge, including Maths and English, are nevertheless important. Further, as well as technical skills we also require students to develop the skills required for employment. For example, Hugh Baird catering college students not only work in the restaurant kitchen but also devise menus, buy stock and share in the profits. The Careers College Trust does not dictate the structure of a career college, there are several different models including operating as a separate part of an existing college, as at Hugh Baird College; operating through a subsidiary company established by a college; or establishment as a joint venture, creating a new legal entity for this purpose, as at South Tyneside College. South Tyneside College is working with a local outstanding school and major employers to create a career college for advanced manufacturing and corporate technology. The Career College Trust brokers such partnerships, two thirds of which have been led by FE colleges and the rest by employers. This model is quite different from that used by UTCs and studio schools, which are separate legal entities with prescribed structures and permitted student numbers. Above all, career colleges are colleges not schools - although they are committed to academic rigour their scale and scope is dictated by the industry concerned. It is crucial that the industry approves the particular proposal and provides at least 40% of the governing board members. “career colleges are colleges not schools” “Career colleges are industryspecific and industry-led education institutions” InStep / Academies and Colleges 6 Some UTCs have struggled to recruit enough students to be viable. How can career colleges avoid this trap? The enrolment of enough students is always a potential problem when creating new education institutions, particularly as 14 is not a usual point at which students move to another institution. However, 14 is the age at which students have to make option choices. In practice, the sponsors of career colleges, whether education institutions or employers, have a longstanding record of involvement in post – 14 education. The involvement of big-name companies may help to open the minds of pupils who would not have considered attending college previously. Career colleges are created to become part of a direct pathway into work and can offer the students a better chance of getting a job. So I think that career colleges are less at risk of under recruiting than UTCs. What services does the Career Colleges Trust offer to colleges? Are they essentially branding mechanisms? The Career Colleges Trust offers substantial and substantive services to potential career college sponsors. There is a need for a national brand to ensure that career colleges are widely recognised. But the Trust’s work goes further than this. The Trust is determined to help sponsors avoid the reinvention of the wheel that can result from wasteful competition and will share with the sector blueprints for what works in developing skills in the areas selected for career colleges. The Trust’s consultation with potential sponsors has resulted in identifying eight areas where sponsors need help. Details are on our website – www.careercolleges.org. uk. We provide an online portal giving access to resources, for example the National STEM centre has made available resources for GCSE maths specifically for use in the context of the construction industry. How do you see SMEs working with career colleges? While the involvement of major employers is invaluable in securing recognition for a career college, all proposals need local support, including support from local businesses. The mix of size of employers is important not only to identify skills needs but also to ensure the supply of work placements, for staff teaching within career colleges as well as for the students. Four career colleges have opened since 2014. How confident are you that you will achieve your goal of 40 career colleges in the next four years? It is probably too early to forecast the precise number of career colleges that will be in place by 2019. There will shortly be nine career colleges and another four are under development. Some 80 organisations have approached the Trust in the last 18 months. However, we are not going for a mass market – if only five career colleges are established in the next year or two, but work well, that will be fine. The Trust is establishing a set of success criteria and these will include the quality of the students’ experience and the distance they have travelled, for example in raising their aspirations and improving their retention – many career college students’ attendance in their previous education would have been patchy or worse. While I understand some colleges might want to wait a little while to see how career colleges develop, there are great benefits to colleges in getting involved with career colleges now. The broad principles, such as close working with employers on industry – specific skills needs, are applicable to all colleges and the Trust can add value to colleges’ wider work. Ruth Gilbert, thank you very much. “There will shortly be nine career colleges and another four are under development.” “there are great benefits to colleges in getting involved with career colleges now.” InStep / Academies and Colleges 7 Changes to TPS/LGPS There has been much change to public sector pension schemes over the past few years, including the Local Government Pension Scheme (LGPS) and the Teachers’ Pension Scheme (“TPS”). The changes include alterations to the benefit structures of the schemes and new governance arrangements. T he Pensions Regulator (which is the regulatory body in relation to pension schemes) has now also got a greater remit in relation to public sector pensions. The aim of this article is to give a brief overview of what’s new in relation to the LGPS and TPS. Legislation The key pieces of new legislation which are relevant here are: – The Local Government Pension Scheme Regulations 2013 (the “LGPS Regulations”); and – The Teachers’ Pension Scheme Regulations 2014 (the “TPS Regulations”). We will now consider the above legislation and the changes which have been made to the LGPS and TPS. LGPS Regulations The LGPS Regulations created a new pension scheme with effect from 1 April 2014, known as the ‘LGPS 2014’. What’s not new? As we are looking at the benefit structures under the schemes it is perhaps just as important to look at what has not changed as to what is different. There have been no material changes to the following: eligibility criteria, auto-enrolment / contractual enrolment provisions, opting out of the scheme, the flexible retirement conditions and provisions in relation to redundancy / efficiency dismissals. What’s new? The changes include: – Career Average Revalued Earnings (CARE benefits) with an accrual rate of 1/49. CARE means that for each year in the new scheme, the member will build up a pension based on their pensionable pay in that year. For each scheme year a pension equal to 1/49 of their pensionable pay will be added to their pension account. Inflation increases will also be added to ensure that pension accounts keep up with the cost of living. – Introduction of the “50/50 section” whereby a member can pay 50% contributions for 50% of the pension benefit. – Contributions payable and pensionable pay (which now is calculated by reference to pay including non-contractual overtime and additional hours). – Normal Pension Age (NPA) which is equal to the individual InStep / Academies and Colleges 8 member’s State Pension Age (NPA was previously 65). – Early retirement (non-ill health). Protections There are also protections in place for accrued rights. This means that there is a final salary link for benefits which have been built up pre-1 April 2014. Further there is the ‘statutory underpin’ which applies if the member retires from the LGPS at age 65 with immediate entitlement to benefits and was within 10 years of that age on 1 April 2012 and had no “disqualifying break” after 31 March 2012 (other conditions also need to be satisfied). The underpin means that the member gets the better of either the new CARE benefits or the final salary scheme benefits for post-1 April 2014 accrual. Applicable contribution rates With effect from when LGPS 2014 came in there was a new member contributions banding table with nine different member contribution banding rates between 5.5% and 12.5%. The employer contribution rates are determined by actuarial valuations and LGPS Regulations provide when these will be carried out. They will vary across employers. TPS Regulations The TPS Regulations created a new scheme with effect from 1 April 2015. What’s not new? TPS remains materially the same as previously in certain respects, ie in terms of: – eligibility criteria – calculation of benefits for statutory maternity / paternity / adoption leave – lump sum death benefits (death grants) – basis of ill-health pension – purchase of additional pension – redundancy terms What’s new? The changes which were applicable from 1 April 2015 are as follows: – The introduction of CARE benefits (see above) (with an accrual rate of 1/57). – Options for the new faster accrual system. – NPA which is equal to the member’s State Pension Age or 65 where that is higher. – Early/phased retirement. – Dependants’ pensions on death of an active member. – Changes to the contribution rates (see below). Protections There are also protections for accrued rights in this scheme. Therefore all members have a final salary link for pre-1 April 2014 benefits. Also, if the member is an active member and was within 10 years of their existing NPA at 1 April 2012 they would stay in the final salary scheme for post 1 April 2015 service. If they were an active member and were between 10 – 13.5 years from existing NPA on 1 April 2012 they would benefit from “tapered protection”. Forthcoming changes to contribution rates The expected outcome of the TPS valuation is a total contribution rate of 26% and it has been proposed that scheme members will pay an average contribution rate of 9.6%, with the balance falling on employers. This means that the new Scheme employer contribution rate will go up from 14.1 to 16.4%. This figure does not include the 0.08% administration levy, which is payable from September 2015 until the outcome of the next valuation is implemented, which is expected to be in April 2019. For further information please contact: InStep / Academies and Colleges Sarah Franklin Partner Birmingham, United Kingdom Tel: +44 121 232 1196 sarahfranklin@eversheds.com 9 Modernising Charity Law The Charities (Protection and Social Investment) Bill 2015 Most, though not all, UK education institutions are charities, although in general exempt from registration with the Charity Commission. Charitable education institutions should be aware of the Charities (Protection and Social Investment) Bill 2015 (“the Bill”) which is currently before Parliament. The Bill is a relatively short one and deals with two areas in particular: the powers of charities to make social investments and granting the Charity Commission (“the Commission”) increased powers to deal with, and prevent, the abuse of charities. Education institutions are increasingly considering using some of their funds for purposes which may give some financial return but also contribute to their educational mission: they therefore should take note of the Bill’s proposals in relation to social investment. All charities need to take note of the proposed new regulatory powers for the Commission. What is a social investment? A social investment is also known as a programme related investment (a term that originated in the US) and this is the term the Commission uses in its guidance on investments. The Law Commission’s report on social investments (produced in 2014) is clear that a social investment is: a transaction from which it [the charity] seeks to achieve both its charitable purposes……and a financial benefit The Law Commission’s report also states that this is “unlikely to be an “investment” in the legal sense”. The primary objective of a social investment is to further a charity’s purposes whilst also seeking to generate a financial return. Some regard making a social investment as an entrepreneurial way for charities to operate because the charity receives funds back to use for its purposes; this should be contrasted with making a grant, where there is usually no return for the charity. Charities usually apply their funds in direct furtherance of their purposes or by investing their funds to produce a financial return to be applied in furtherance of the charity’s purposes. A social investment, however, is made with the intention of achieving both of these outcomes. The power to make a social investment Many charity trustees are unsure whether they have the power to make social investments because the majority of charities do not have explicit powers to do so set out in their governing documents. The result is that charity trustees have to rely on powers to spend (and possibly to invest) when making social investments, the uncertainty of which can make charity trustees uneasy; this is something that Lord Hodgson reported on in his review of the Charities Act 2006. As a result of Lord Hodgson’s report, the Law InStep / Academies and Colleges 10 Commission undertook a review of the law on social investments. It is worth noting that the proposed power to make a social investment will supplement rather than replace any other powers that a charity may rely on to make a social investment. The power may be restricted by a charity’s governing document and it applies to charities in existence when the Bill passes into law as well as those established after that date. The Bill also introduces the concept of duties in relation to the making of social investments. The duties apply regardless of whether the power used to make the social investment in question is the new power conferred by the Bill or some other power. Before exercising the power of social investment charity trustees must consider whether advice should be obtained and satisfy themselves that the investment is in the best interests of the charity. Charity trustees must also review social investments from “time to time”. The duties imposed on them cannot be restricted or excluded by the charity’s governing document. The social investment element of the Bill has been well received by charity trustees and the Charity Commission, even though the view of many is that the Bill is only really setting out in statute powers that many charities already have. That said, it is hoped that having a statutory power will encourage an upturn in social investments by charities. Protection of charities – increasing the Commission’s powers The Bill is seeking to provide the Commission with a number of new powers. It is worth noting that the Commission already has an extensive set of powers, although they are not always fully used. One of the reasons for the new powers is to prevent the abuse of charities, particularly in relation to terrorist fundraising. The new powers that the Commission is proposed to be given include a power to issue “official warnings” for breach of trust, misconduct or mismanagement. The Commission will also be able to suspend a charity trustee pending investigation and ultimately remove a charity trustee following an inquiry or disqualify a charity trustee or a person in senior management of a charity. It will also have the power to wind up a charity upon giving public notice. The Bill also increases the number of situations that result in automatic charity trustee disqualification; now included are: unspent convictions for an offence of dishonesty, contempt of court, or disobedience regarding a Commission order. The Bill states that the Commission will keep a register of all persons that have been disqualified by the High Court or Commission. There are differing views in the charity sector as to how often the powers will be used and the extent to which the powers will affect charities’ operation. However, the Commission regards the new powers as vital if it is to fulfil its role as an effective regulator. The Committee Stage for the Bill in the House of Lords commenced on 23 June 2015. If significant amendments are made to the Bill as it proceeds through Parliament we will issue briefings on them. For further information please contact: Stephen O’Reilly Principal Associate Cambridge, United Kingdom Tel: +44 1223 443666 stepheno’reilly@eversheds.com “a transaction from which it [the charity] seeks to achieve both its charitable purposes…… and a financial benefit ” InStep / Academies and Colleges 11 Launch of the Academy Govern@nce service The transition from a system of maintained schools under the auspices of local authorities to a landscape comprising charitable companies of various types continues to present significant challenges for those charged with implementing good governance in academies. We know from experience that fixed cost early access to legal support is an effective way of managing governance risks. Eversheds has created a unique service for Business Managers, Clerks, Company Secretaries, Directors and Members of single academies, multiacademy trusts, free schools, studio schools and UTCs as well as those that sponsor them. The Academy Govern@nce service will be available from September 2015. Service benefits will include access to a helpline via phone or e-mail to our team of academy governance experts and will cover any query in relation to: – the memorandum and articles of association; – the funding agreement; – the Academies Financial Handbook; – the DfE Governors’ Handbook; – charity law; – schemes of delegation; – roles of directors and members; – statutory registers and Companies House returns; – relationships between sponsors and academy trusts – conduct of board and general meetings – boardroom disputes – collaboration arrangements In addition subscribers will also have access to the following: – Question of the month - a summary of the most interesting and popular helpline question asked with a detailed response. InStep / Academies and Colleges 12 – An annotated copy of the memorandum and articles of association and a summary of the funding agreement, highlighting the key themes arising from the DfE model documents and common challenges including notes on the powers and responsibilities of directors, members and charitable trustees. – A variety of briefings on issues relevant to academy governance. – Access to a limited number of template policies designed specifically for academies including: – whistleblowing – anti-bribery and corruption – conflicts of interest – code of conduct. – Access to a dedicated extranet site allowing easy access to key Academy Govern@nce documents and useful links. – Access to an electronic document vault for secure access to and storage of copies of your key documents, e.g. memorandum and articles, funding agreement, lease, commercial transfer agreement and deeds of variation. – Discounted access to our Company Secretarial Service. More details of the service and subscription rates will be available shortly. For further information please contact: Ben Wood Partner Leeds, United Kingdom Tel: +44 113 200 4273 benwood@eversheds.com InStep / Academies and Colleges 13 The 157 Group – Freedom and Flexibility: colleges and skills in 2015 Eversheds has contributed to a 157 Group ‘think piece’ entitled ‘Freedom and Flexibility: colleges and skills in 2015’. A copy of the publication can be found on the link below: www.157group.co.uk/sites/ default/files/documents/157g-130- freedomandflexibility.pdf Eversheds news 14 Eversheds Education Seminar Programme 2015/16 We are pleased to confirm that we are currently planning our 2015/16 seminar programme. Details will be circulated shortly but, as always, we welcome feedback from you with regard to what topics you would like to see in the programme. 15 Did you know? The Eversheds’ Education Team produce a variety of briefings which are tailored specifically for education institutions. They include briefings on a wide range of topical issues including, HR, pensions, procurement, students, estates and many other legal areas. To subscribe to our briefings please visit our online subscription page at: eversheds.com/global/en/where/europe/uk/sectors/education/ subscribe.page? eversheds.com ©Eversheds LLP 2015. Eversheds LLP is a limited liability partnership. DT04764_08/15
