The education secretary has committed to fully funding this year’s teacher pay rise following lobbying by the National Education Union, the union has claimed. The government confirmed in July that teacher pay would increase by 3.5 per cent from this month. Despite the NEU threatening to strike if the pay award was not fully funded, schools were expected to help stump up a significant part of this cost. The NEU previously estimated schools would have to find about £460 million from their budgets. About half the 2026-27 pay increase (1.7 per cent) was to come from additional government funding, while schools were expected to provide about 1.8 per cent of the award. But in a letter to NEU general secretary Daniel Kebede, seen by Schools Week, education secretary Lucy Powell on Wednesday confirmed schools can use savings from lower pension contributions to fund pay rises. It is estimated these savings will amount to around £500 million. The government stressed the pay award remains the same as before, but that the change makes the rise more affordable for schools “at a national level”. The NEU said it amounts to “a fully funded pay increase for all teachers throughout England”, hailing it as “a significant step”. Schools have also seen a “considerable reduction” in contributions to teachers’ pensions. But these savings are still expected to be clawed back by central government to fund other priorities, like defence. ‘Confident schools can now meet cost’ A spokesperson for the secretary of state said Powell “has been clear from day one that supporting teacher recruitment, retention and wellbeing, and rebuilding the relationship with the profession, are among her top priorities”. “High-quality teaching is the single most important in-school factor in improving outcomes for children, which is why this government has backed the profession with a pay award that recognises teachers’ vital role,” they said. “Teachers will play a leading role in delivering this government’s education reforms. That’s why following recent changes to Local Government Pension Scheme [LGPS] employer contributions, we are confident schools can now meet the costs of the award at a national level.” Pension savings not clawed back In her letter to Kebede, Powell wrote: “I understand you are concerned the funding available in 26-27 is insufficient to cover the costs of the recent pay award. “I am therefore pleased to be able to update you that recent revaluations to the Local Government Pension Scheme will see a 4.9ppt reduction in employer contribution rates and deliver significant savings on schools’ pay bill for support staff. “We can confirm this reduction in costs will not be clawed back, and as such, we are confident that schools will be able to cover the costs of the teacher pay award, at a national level.” Luke Sibieta, research fellow at the Institute for Fiscal Studies, said: “Today, the government has announced an effective £500 million boost to school funding in England, which equates to a permanent increase of just under 1 per cent. This is due to the government no longer clawing back savings that have resulted from lower employer pension contributions for support staff. “Alongside the £700 million top-up announced for this year in July, today’s £500 million boost means that the government is now fully funding the cost of this year’s 3.5 per cent rise in teacher pay. “Coming on top of other funding increases, this means that from next year schools will be £1.6 billion better off than they had expected to be this summer.”‘A message of hope’ Welcoming the news, Kebede said: “Finally, we have a government that accepts the reality that any teacher pay award must be fully funded. “Plugging the £460 million black hole in school budgets signals a welcome return to reality, and a message of hope for the entire school community.” He hailed the “significant ground conceded by government” as “a consequence of NEU members’ willingness to take a stand”. “Schools have been running on empty for far too long. “Leaders simply could not afford to fund the pay award as set out by the previous education secretary. The new administration has accepted that it is wrong to force schools to make cuts to education just to make ends meet.” “We hope to work with this government to ensure that education is truly valued in this country. We hope today marks an important turning point, and one we as a union will aim to build from. We must make austerity in the classroom a thing of the past.” The NEU was due to hold a formal strike ballot, opening on 3rd October. Kebede said the NEU executive will now meet on 24th September, to “discuss our response”. Announcing the 3.5 per cent pay rise in July, the government said the first 1 per cent was expected to come from schools “maximising value” – finding savings – in existing budgets. A further 0.8 per cent from “funding in schools’ existing budgets…as per [the DfE’s] affordability assessment” in its school costs technical note (SCTN). Mixed picture for schools LGPS rates are set at local level, and vary across England. One CFO said: “There is a mixed picture depending on where you are.” They said their employer contribution “doesn’t reduce enough for the teacher pay increase”. Meanwhile, Schools Week has heard from chief financial officers and school business leaders who had already baked the savings into their budgets. Schools Week understands many had already factored in the additional headroom, on the presumption the Treasury would not claw back the savings. Stephen Morales, chief executive of the Centre for Education Operational Excellence, had warned against doing this, but said under-pressure business leaders had been forced to make budget decisions in “an information vacuum”. He said this was worsened by “significant delays” on the teacher pay announcement. Some CFOs “took a cautious approach” and did not assume they would be able to keep the headroom. “Others have said ‘I’m under enormous pressure from my…leaders, headteacher, to use this money to improve either the quality of teaching or facilities so have boldly moved ahead on the assumption [they could]”. Morales described this as “a perfect storm” of “false optimism from the sector…and a lag between information the sector needs to do its planning in a timely way”. “We’ll see how this plays out. If we find ourselves at the end of the year with budgets that don’t balance, we’ll see what government’s response to that is.” Detail important Pepe Di’Iasio, general secretary of leaders’ union ASCL, said school leaders had been “extremely concerned that the shortfall they were facing would leave them with no alternative other than to make further cutbacks to educational provision”. “We have been representing these concerns to the government over the past few weeks and this breakthrough is very welcome.” But he noted that the government “has said only that this money will cover costs ‘at national level'”, adding: “We will be taking a close look at the implications at the level of individual schools.” “It should not need saying that every school must have the funding that it requires to pay its staff. ‘Pressure remains intense’ “Despite the extra funding, the wider pressure on school and college budgets remains intense.” Meanwhile Paul Whiteman, general secretary of school leaders’ union NAHT, said: “We wrote to the previous chancellor about this in May of this year and we are pleased that the new administration has heard and understood our demands. “We will need to look carefully at the detail to determine whether this means the pay uplift is genuinely fully funded at an individual school level, but it certainly puts schools in a better position than they would otherwise have been.” Matt Wrack, general secretary of teachers’ union NASUWT, also welcomed the move, warning school would otherwise have faced “further cuts to staffing, resources and provision for pupils”. “Schools still need a sustainable, long-term injection of extra funding if they are to be able to meet the challenges posed by the growing complexity of needs among our children and young people,” he added.
Anne 16 September 2026 This is not good or additional news the revaluation of support staff pension (LGPS) cane into effect from April 2026, there never was any news of this being clawed back, and the amounts vary by MAT,SAT or Local Authority so not everyone had a reduction of over 4%. They still intend to claw back the teacher pension revaluation next year.
M 17 September 2026 This is not ‘additional funding’. These are already banked savings that schools were aware of back at the start of this year and the amount dramatically varies depending on which local authority is administering the pension fund and how much they were able to reduce their employers contribution rate by. This is very misleading.
Fiona Green 17 September 2026 I completely agree with the above, the government are not giving any additional funding. This is funding already budgeted for in April. The government have never contributed to the LGPS funding when the cost has risen, or ever clawed back when the contribution has reduced. If is a fact that they cannot claw back from a local government pension. So this is a completely untrue statement.
Edward 17 September 2026 I’m not sure “fully fund” is an accurate description. Schools have been paying the new, lower LGPS rates since April and will already have reflected them in this year’s budgets. LGPS rates are revalued every three years and, unlike TPS, there has not historically been an automatic GAG adjustment when they change. This therefore looks less like new funding and more like an existing saving now being counted towards the teacher pay award.
J 17 September 2026 Very misleading. Schools would have already budgeted at the lower on-cost rate for LGPS employees and, as far as I’m aware, there has been no previous mention of the intention to claw-back funding as a result. That means there is no new benefit to schools budgets as a result of this announcement. We are still expecting a reduction in funding as a result of the savings from the lower Teachers Pension contribution taking effect in April 27.
Wendy 17 September 2026 In reality our school already banked this saving in setting 26/27 Budgets as the Local authority tri Annual Valuation was completed and LGPS Contribution rates reduced. Its a very misleading to explain to heads this morning who thought more funding was coming to schools. No celebrations needed/no good news we still in the same challenging Financial position. The claw back of Teachers Pension will mean a decline in per pupil funding year on year and could end up costing schools depending on the mix of staff. A disappointing spin of information.
SM 17 September 2026 Full agreement with M above. The sector was not informed of this clawback and the savings from it were already used to offset other cost pressures. This is therefore not new money that helps schools in anyway shape or form – a clawback has been cancelled that was never communicated or expected. Therefore we’re in the same position financially as we were pre-announcement.
James 17 September 2026 Academies did not receive extra money from the DfE in the past when employers’ LGPS contribution rates increased so why would the DfE feel justified in clawing back the equivalent cash when the rate (temporarily) drops?
Anon 17 September 2026 You know this is nonsense don’t you. DfE never funded LGPS pension increases and has no mechanism to claw anything back. As other have said, the known reduction in LGPS contributions has already been baked into school budgets.
Chris Wilson 2 October 2026 Pretty much agree with everything that has been said. When LGPS rates increase there is no new additional funding and schools are left to find the money. This to me looks like someone is trying to be clever and hoodwink everyone into believing that the ‘Government’ have fully funded the teachers pay rise. It is a an old age trick of using ‘smoke and mirrors’ to gain a political posturing at no cost. Even the last Tory Government didn’t stoop this low.