Teachers’ Pension Scheme (TPS) Update

A 5% increase to the employer’s contribution to the Teachers’ Pension Scheme (TPS) has been announced!

Every four years, the Government Actuary’s Department carries out a valuation of all unfunded public service pension schemes, including the Teachers’ Pension Scheme.

The outcome of the valuation of the Teachers’ Pension Scheme has now been published based upon 2020 data.

The cost for teachers working in local authority and academy schools will be paid by the government for 2024-2025; independent schools will have to meet the rise in full.

Some private schools will seek to leave the scheme, which would lead to their teacher staff having significantly worse pensions. Others may seek ‘phased withdrawal’, ostensibly protecting teachers currently in the scheme while putting new teachers on inferior defined contribution provision.

Despite lower-than-expected pay rises and a fall in the expected rise in life expectancy – which would point to a reduction in contribution rates – in the 2020 valuation, the liabilities have increased on account of a technical change imposed by the government. The discount rate – the formula used to calculate the rate of interest on assets and liabilities – has been altered from CPI+2.4 per cent to CPI+1.7 per cent. This has had the effect of increasing the employer contribution from 23.6% to 28.6%. 

This technical change to the way in which the scheme is valued will have serious detrimental consequences for some teachers working in the independent sector and ramifications for all. The government needs a cohesive strategy for the profession as a whole.

It will divide the profession into those who have a good pension and those who do not.

Read more here.

Sector Response

Dr Patrick Roach, General Secretary of NASUWT-The Teachers’ Union, said:

“The Teachers’ Pension Scheme (TPS) is an immensely valuable element of the reward system for teachers. The importance of a defined benefit, inflation-proofed, pension scheme during a teacher shortage should not be underestimated. For many teachers, the TPS is a key reason why they remain in the teaching profession.

“The Government is well aware that the cost of teachers’ pensions, since 2012 onwards, is lower than previous predictions, partly because of worsened life expectancy arising from the coronavirus pandemic. The Government needs to take this into account and should confirm now that it will not raise the pension age for working people any further.

“The stagnation in the UK economy on this Government’s watch has fed through to a higher employer contribution to all public service pensions, not just the TPS. Teachers should not be left to pay the price of the Government’s economic failure.

“The increase in the employer contribution has arisen because of HM Treasury policy, rather than because teachers’ benefits have risen in value.

“The NASUWT and other unions have already proposed an alternative and credible methodology for setting the SCAPE discount rate when the Government consulted on this in 2021. We now urge the Government to look again at this.

“We expect the Government to keep its promise that the increase in employer contributions will be fully funded.

“We are also clear that independent school employers should be in no doubt about the importance of the TPS to their teachers. The NASUWT will continue to oppose attempts by independent school employers to worsen our members’ terms and conditions by leaving the Teachers’ Pension Scheme.”

Daniel Kebede, General Secretary of the National Education Union, said: 

“Our members working in independent schools are dedicated professionals, committed to and working hard on behalf of their pupils. They have earned their pensions. 

“To face the threat of losing a decent pension is unacceptable. It should set alarm bells ringing across society.

“Attracting top quality graduates to the teaching profession is mission critical to the country’s future prosperity. This will not happen with the erosion of both pay and pensions.

“The Government needs to find a cohesive plan for the whole teaching profession. They must ensure that remuneration is attractive and working hours reasonable. Gillian Keegan needs to demonstrate the value she places on educating our children.

“To those employers considering seeking to enforce detrimental change against staff wishes using the pernicious practice of ‘fire and rehire’, the NEU cautions them to consider very carefully the damage it will cause to staff morale.  We will fight employers industrially on this.

“The NEU is not prepared to sit back while our members see their contracts of employment ripped up and their pensions snatched away. The NEU will robustly support our members to take all necessary action to defend their terms and conditions.”