Pay rise funding claims ‘misleading’, say school finance chiefs

School finance leads have hit back at “misleading” claims schools can now afford this year’s teacher pay increase because of savings on support staff pension contributions.

Lucy Powell, in a letter to NEU general secretary Daniel Kebede, has acknowledged the union’s concerns current funding would not cover the cost of the recent 3.5 per cent pay award, announced in July.

“I am therefore pleased to be able to update you that recent revaluations to the Local Government Pension Scheme (LGPS) will see a 4.9ppt reduction in employer contribution rates and deliver significant savings on schools’ pay bill for support staff,” she wrote, in the letter seen by Schools Week.

She added: “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.”

At the time, the National Education Union hailed the “significant ground conceded by government is a consequence of NEU members’ willingness to take a stand.

“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.”

But the announcement has met with widespread criticism from school business professionals, who have pointed out the support staff pension savings have been known about since April – and factored into budgets already.

Employer contributions have been paid at the new rates for five months already, and there had been no earlier indication from government that the money was ever due to be clawed back.

‘No clawback was communicated’

Stan Mossop, chief finance officer of Blessed Edward Bamber Catholic Multi-Academy Trust said: “At no point was a clawback on LGPS savings ever communicated.”

“The government’s ‘fully funded’ teacher pay rise announcement provides no new money,” he said.

“It represents a misleading distraction, counting localised support staff pension savings that schools have already absorbed into their budgets as ‘funding’ for teacher pay increases.

“As a result, school budgets remain completely unchanged, leaving leaders across the country to absorb the new pay costs using money they had already allocated elsewhere.”

Multi-academy trust CFO Jo Long said: “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.”

In fact, schools are still expecting a reduction of funding because the government will claw back corresponding teachers’ pension savings that take effect next April following a similar revaluation.

One business leader said this “made sense” as government previously increased funding to schools when TPS employer contributions rose.

But Schools Week understands government did not increase funding when LGPS contributions increased previously.

Unlike with the TPS, funding is not routinely adjusted in line with LGPS valuations.

Fiona Green, strategic finance lead at St Mary’s CE Primary School in Tunstall, Stoke on Trent, said: “Additional costs or savings (regarding LGPS) have historically been for schools to bear or benefit.”

Another finance lead said schools and academies “did not receive extra money from the DfE…when employers’ LGPS contribution rates increased so why would the DfE feel justified in clawing back the equivalent cash when the rate (temporarily) drops?”

NEU doubles down

Yet responding to the criticism, an NEU spokesperson said the union “is clear that as a result of the union’s campaigning this is money which will now stay in the school system, rather than being clawed back by government”.

“We have campaigned for a fully funded pay rise for the whole school workforce – teachers and support staff – and this is a win on exactly those terms.

“By announcing the money will not be clawed back, Lucy Powell has set an important precedent, both for the LGPS and the Teachers’ Pension Scheme. We now want her to follow through and reverse the planned clawback from the TPS which Bridget Phillipson set in train.”

They added that they “will look closely at the detail of this announcement and press ministers to ensure all schools receive adequate funding for staff pay”.

‘Real additional saving’

July’s pay award and funding announcement was based on schools’ affordability, as set out in the DfE’s school costs technical note (SCTN) from March.

The Department for Education has said that as the impact of the LGPS revaluation was not then publicly available, it was not factored in, meaning this “represents a real, additional saving for schools”.

Education secretary Lucy Powell said: “Supporting the whole school workforce remains a priority for this government, and the recent pay awards and funding will benefit teachers, teaching assistants and support staff alike.

“The recent Local Government Pension Scheme valuation reduces what schools have to pay into the scheme as employers, but it does not reduce the pension benefits support staff receive. This has the overall effect of supporting the whole school budget.”

The DfE said the TPS clawback will be equal to the reduced cost for schools, and “cost neutral for public sector employers at national level”.

Rates vary widely

Meanwhile, rates of employer contribution differ widely across the LGPS, which comprises 86 separate local funds that locally administer the scheme across England and Wales.

A recent LGPS advisory board report showed that between 2022 and 2025, total contribution rates fell by 4.9 per cent, on average.

But this varied widely, between Tower Hamlets which saw the largest decrease at 10.2 per cent, and the London Pensions Fund Authority which saw no change.

In the 2025 period, the average total contribution rate was 16.5 per cent, but this ranged from just 1.3 per cent in the Royal Borough of Kensington and Chelsea, to 24.2 per cent in Camden.

Green said: “We were advised by our local authority that from April 2026 our employer contribution would reduce to 21.2 per cent, from 24.2 per cent in April 2025.

“This was then built into our 2026-27 budget, as it is every year if a change applies. So therefore, we are receiving no additional funding from the government.”

Another finance leader said: “The amounts vary by MAT, SAT or local authority so not everyone had a [contribution] reduction of over 4 per cent.”

‘Still in same position’

One school business manager said they had “already banked this saving in setting 2026-27 budgets”, and described having to “explain to heads this morning who thought more funding was coming to schools”.

“We [are] still in the same challenging financial position,” they added.

“The clawback of Teachers’ Pension [savings] 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.”

Another questioned the NEU’s framing of the decision as “fully funding” the teacher pay increase.

“Schools have been paying the new, lower LGPS rates since April and will already have reflected them in this year’s budgets.

“This…looks less like new funding and more like an existing saving now being counted towards the teacher pay award.”

The NEU and DfE have been approached.