Explainer: What’s happening to teacher pay and pensions in 2026?

What schools need to know after the government released its response to the STRB report

Lydia Chantler-Hicks

How much will pay rise?

The government has accepted pay recommendations made by the School Teachers’ Review Body (STRB) for the next three years.

Under the multi-year agreement, teachers will receive a 3.5 per cent pay increase from September this year and a further 3 per cent increase from September next year.

An indicative pay rise of 3 per cent has also been confirmed for 2028, although a final decision has not been made.

The rises will apply to all teachers and leaders, except unqualified teachers who are set to receive a 5 per cent uplift in September to prevent their pay falling below the national living wage.

The rates set for the next two years cannot be changed. If economic conditions “diverge significantly from forecasts”, its impact would have to be addressed in the 2028 award.

The government will now consult on the plan with union bosses and other sector leaders.

Who is funding the rise?

About half the 2026-27 pay increase (1.7 per cent) will come from additional government funding, which was announced alongside the 2026 pay announcement.

The DfE has said schools will be expected to contribute “the first 1 per cent” of the 2026-27 and 2027-28 awards.

But it is now clear schools will have to provide about 1.8 per cent of the 2026-27 award.

In a briefing to teachers and leaders last week, Patrick Carey, the DfE’s director for the school workforce, said schools would “on average” have 1.7 per cent in extra funding next year for a pay award.

To those planning school budgets, he said: “In effect, provided you had…1.8 per cent put aside for the pay awards, with this extra 1.7 that will cover the pay award next year.”

However, he acknowledged this would be “very different for each school and their circumstances”.

How are schools expected to afford it?

Schools will be expected to fund the 1 per cent of the next two rises by “maximising value” – that is, find savings – in their existing budgets.

This is 1 per cent on average, and is based on affordability assessments set out in the DfE’s schools’ costs technical note (SCTN), said Bridget Phillipson, the education secretary.

The government’s “maximising value for pupils” programme launched in December to help schools find savings with offers such as special energy rates, a banking comparison tool and capped fees for supply staff agencies.

Source: DfE

Georgia Gould, the schools minister, recently revealed only about 500 schools have used its banking comparison tool, and about 1,000 its energy scheme.

Meanwhile, the DfE acknowledged in its SCTN in March that the scope for “realising better value” would “vary significantly between schools and is expected to increase over time”.

It said there would be better potential for savings from 2027-28, “due to greater opportunity to plan and adapt”.

Meanwhile, the remaining 0.8 per cent teacher pay increase for 2026-27 will come from “funding in schools’ existing budgets, provided at the 2025 spending review, as per [the DfE’s] affordability assessment”.

In the SCTN, the DfE predicted schools would have financial headroom of “1.8 per cent on average” – or £1 billion nationally – across the next two years.

This was calculated by taking the difference between increases in funding and costs. Assumptions are made using averages, and do not take into account varying school budgets and contexts.

The SCTN suggested most of this “headroom” would come in 2027-28.

It is not yet clear how much schools will be expected to contribute from existing headroom for the 2027-28 pay rise.

Where will the government funding come from?

The government is providing an extra £700 million in grant funding this financial year to help cover the impact of this year’s pay rise between September and the end of the financial year in March.

It has also set aside £1.1 billion to help fund the impact in the 2027-28 financial year of both the 2026 pay rise and the 2027 pay rise.

The money will be provided through the “schools budget support grant”.

Schools will receive a lump sum, as well as a basic per-pupil rate with varying rates based on key stage and a per-pupil rate for pupils recorded as having been eligible for free school meals at any point in the past six years.

The education secretary confirmed this funding would come from existing DfE budgets, but the department has not confirmed more details.

The £700 million in funding for 2026-27 will include £635 million for schools.

Most – £522 million – will go to mainstream schools, including special units and resourced provision.

Meanwhile, £98 million will go to special, AP, and hospital schools, and £14 million to teachers and support staff centrally employed by councils.

On top of that £634 million, £18 million will go to schools with early years provision, and about £49 million for post-16 provision in schools and academies.

A breakdown has not yet been provided for 2027-28.

The DfE has released a calculator tool that schools can use to estimate their funding for 2026-27. It is only available for mainstream schools.

Pensions changes

The government has also confirmed employer contributions to the teachers’ pension scheme (TPS) are set to fall from 28.6 to 17.6 per cent from April next year.

But it is not expected to result in any financial gain for schools, as funding will be reduced from April to reflect the decrease.

The government has raised grant funding to schools and colleges in recent years to compensate for pension cost rises. But following the change in April, it will reduce this by about £3 billion.

Luke Sibieta, a research fellow at the Institute for Fiscal Studies (IFS), said it should “all be approximately neutral from schools’ perspectives.

“Their costs will go down by £3 billion and their funding will go down by £3 billion.”

The changes will have no impact on the value of teachers’ pensions.