On Wednesday 16 September, a DfE announcement triggered widespread confusion across the education sector. In a letter to the NEU, education secretary Lucy Powell stated that recent revaluations to the Local Government Pension Scheme (LGPS) led to a 4.9 percentage point reduction in employer contribution rates, delivering significant savings on support staff pay bills. Confirming these savings will not be clawed back, the DfE claimed it is confident schools will be able to cover the costs of the 3.5 per cent teacher pay award at a national level. It is estimated that these savings amount to around £500 million a year. This announcement appears to mix up two entirely separate pension schemes. Both the LGPS (pension for support staff) and the Teachers’ Pension Scheme (TPS) have seen improvements in their financial position, largely driven by market improvements rather than education policy. The TPS is managed centrally. While employer contributions for the TPS are set to reduce from 28.68 per cent to 17.68 per cent from April 2027, schools are still expecting the central government to claw back this funding. By contrast, the LGPS is the pension scheme for support staff, and its rates are set at a local level. There are 86 separate local funds administering the LGPS across England and Wales. Isio’s independent prudence watch analysis on the LGPS actuarial valuation results has calculated that the contribution reductions across each of the 86 LGPS funds range from 0.3 per cent to 15.6 per cent. And because each of the many schools in these funds have their own contribution rates, the differences are even greater. This means that clawing this money back centrally in a way which is fair would have been practically impossible anyway. This is not new money Schools have been paying the lower LGPS rates since April 2026 and had already factored them into budgets long before the teacher pay award was announced. Consequently, there is no additional benefit to current school budgets, and it cannot be retrospectively mandated as new income. The claim is misleading. Framing this as a fully funded teacher pay award is disingenuous smoke and mirrors. It is therefore perplexing why unions and government think they are doing schools a favour by letting us keep savings we have already banked. If this narrative were true, paying for a teacher award using support staff pension funding would be deeply sensitive and there should have been much better planning and careful communication to explain why this is a reasonable thing to do. It also raises legal grounds regarding the planned clawback of TPS savings after issuing funding letters earlier in the year. Also, in the past, when TPS employer contribution rates increased, schools received additional funding from the government to cover the gap. Conversely, when LGPS rates have increased, schools have never been given extra funding to cover those costs. Postcode lottery More fundamentally, it resurfaces structural issues highlighting the inequity of the LGPS rates across the country. Core school funding is allocated through the national funding formula (NFF). Because LGPS contribution rates vary so drastically across individual funds and for employers within each fund, this creates a significant postcode lottery. Many schools sought lower contributions as part of this actuarial valuation. Some were more successful than others. This announcement has highlighted the unfairness for those schools who had lower than average contribution reductions. The announcement will also create a challenge for DfE and the LGPS, as schools will be much more focused on achieving lower employer contributions at the next actuarial valuation, if not sooner. Last week’s news has also created significant uncertainty across the sector. Finance professionals need urgent clarification. Will there be genuinely new funding, and how will it be distributed? We also regret the lack of consultation. By setting the precedent of not clawing back LGPS savings, the government must now follow through and reverse the planned clawback from the TPS. Schools are still expecting the savings to be taken away. Reversing that decision would represent genuine new relief for schools across the country experiencing significant pressures Despite recent reductions, LGPS employer contribution rates remain much higher than they need to be, given the large surplus the scheme enjoys. The current postcode lottery of different funds proves the system is fractured and it doesn’t allow for fair adjustments to DfE funding. A single, consolidated LGPS for schools would help solve these regional disparities and allow schools to concentrate on what they do best.