A “considerable reduction” to the amount schools contribute to teachers’ pensions is “highly likely” following a revaluation of the scheme, a minister has revealed. But teachers’ contributions and pension pots are not expected to be affected by the change. Schools currently pay a fee equivalent to 28.6 per cent of teachers’ wages every year into the teachers’ pension scheme. But speaking in the House of Lords yesterday, skills minister Jacqui Smith said the rate is expected to drop significantly amid a review of the amounts paid into public sector schemes. “[Rates] have gone from 16.48 per cent in 2019 to the current 28.6 per cent,” she said. “It is highly likely… that there will be a considerable reduction in the average employer contribution rate as a result of that revaluation.” Any change would come into effect next April and would remain in place for four years. £12bn lower Smith noted that the government actuary’s department has written to the Treasury stating the “average employer contribution rate across the unfunded public service pension schemes, of which the TPS is one, is expected to fall significantly”. Across the schemes “contributions are expected to be over £12 billion lower in 2027-28 than in 2026-27”. The expected reduction is due to an increase in the SCAPE discount rate, a government assumption used to calculate the value of future pension benefits. Employee contribution rates of 9.6 per cent on average will not be affected by the change. Pension pots will not be impacted either. News of the anticipated savings schools will make from the reduced payments comes as the sector waits for the government’s decision on teacher pay from September. The Department for Education previously said teacher pay should rise by 6.5 per cent between 2026-27 and 2028-29, but admitted schools will have to make cuts to afford such a rise.
David Fountain 17 June 2026 The SCAPE rate has gone up from CPI plus 1.7% to CPI plus 2.0%. As a result, unlike mortgages, when the rate goes UP the cost to fund the scheme goes DOWN. As a result the amount employers have to pay will drop. What does this mean to TEACHERS? Actually very little. — As a body our contributions are not linked to the SCAPE rate, “we”, on average, have to pay 9.6% of wages. Last year the figures showed that “we” were paying an average below that amount. As a result most tiers of teachers had to pay an extra 0.3% – all but the lowest tier, which remained at 7.4%, went up by 0.3%. The change to SCAPE is not going to change OUR contributions — Our pensions are a “promise” to pay a pension (and other benefits) according to a set of rules. Those rules are unaffected. (The cost of paying for the promised pension falls on the Government and, through them, the employers. A higher SCAPE rate results in a lower cost for them and this is why a cut in employer contributions is expected) — VALUATION. This is an area that will affect teachers. Cash Equivalent Transfer Valuations (CETV) will now be lower than they were. This affects those transferring their pensions and those needing valuations for divorces and separations. The value will now be less that it used to be. The guesstimate on this is around 5% less. — Transfers to other public sector schemes are really going to be unaffected because, whilst the value of the TPS will get a “paper figure” that is lower than it was, that figure will be “buying” a larger amount of pension in the new public sector scheme than it did previously – so it is expected to make no difference to what “promise” you can buy in the scheme you would be moving to. — Transfers to private pension scheme will be hit. However, this only affects those teachers who have less than 2 years in the TPS since anyone with more than this CANNOT transfer to a private scheme. Given that currently a transfer pays out 3 to 5 times what you could get as a “refund” even a 5% cut in the transfer value is unlikely to make a refund better value than a transfer! INDEPENDENT SCHOOLS This is the area of greatest uncertainty. Many Independent schools left the TPS on the basis that they could only see employer contributions going up. This prospective drop in contributions may see them re-evaluate their positions. A number of Unions negotiated “cost neutrality” clauses when schools withdrew and it is going to be interesting (swap unsettling for those involved) to see how this might lead to those who chose to remain in the TPS getting pay rises.