School pension contributions could rise from next year

The employer contributions schools pay towards teachers’ pensions look set to rise from 2019, the Treasury has said.

A valuation of teachers’ pensions, which takes place every four years, has suggested public sector workers will get improved benefits from April next year.

However new draft directions for the Teachers’ Pensions Scheme, published on Thursday, states “early indications” show that the “amount employers pay towards the schemes will need to increase”.

There is no information yet about how much extra schools may have to pay.

But the government has agreed to cover any potential increased employer costs for the 2019-20 year. There is no guarantee of funding after that, though.

The Financial Times has reported the total of increased payments across the public sector could be as high as £4 billion.

The news of further budget squeezes will ramp up pressure on school leaders who are already making wide-ranging cuts with their government funding falling in real-terms.

It also follows the Department for Education’s announcement of a 3.5 per cent pay rise for some teachers, which is only part-funded by the government.

The draft directions for Teachers’ Pension Scheme stated: “Initial indications are that the protections in the new cost cap mechanism mean public sector workers will get improved pension benefits for employment over the period April 2019 to March 2023.

“This test, known as the cost control mechanism, was introduced to offer taxpayers and employees protection from unexpected changes in pension costs.

“In addition, early indications are that the amount employers pay towards the schemes will need to increase. This is because of proposed changes to the discount rate, which is used to assess the current cost of future payments from the schemes.

“At this time, we’re unable to provide information on what the employer contribution rate will be, but the Department will be providing additional funding to maintained schools and academies in 2019-20 in view of the unforeseen costs.”

The document stated the department will now complete the valuation and provide details of the employer contribution rate and any other options for amending members costs.

“We will of course continue to provide further updates as soon as information becomes available.”

The government will consult on the proposals with “all parts of the education sector” so they can “implement this effectively”.

A Department for Education spokesperson added: “These public sector pension changes announced by the Treasury will mean better benefits for teachers and staff working throughout our education system – on top of what is already one of the best pension schemes available in the country.

“We will be consulting with the education sector on these proposals on the basis that the Government will cover the extra costs involved for state-funded schools and colleges for the rest of the Spending Review.”