Schools given £940m to fund pension contribution increases

Written by: Pete Henshaw | Published:
Image: Adobe Stock

Extra government funding of £940 million has been set aside to cover the increased cost of contributions to the Teachers’ Pension Scheme (TPS) in 2019/20.

Confirmed yesterday (Wednesday, April 10), the announcement commits to fully funding the increases for state-funded schools and colleges until the end of the current Spending Review period in March 2020.

The Department for Education (DfE) has said that payments will then be made to academies to cover the five months from April to August 2020 and has pledged that maintained schools will receive equivalent funding when the Spending Review covering the three-year period from April 2020 is finalised later this year.

The TPS is guaranteed by the government and offers a typical teacher around £7,000 in employer contributions every year. It was confirmed last year that the contributions schools make are to rise 16.4 per cent to 23.6 per cent from September 2019. It is estimated that this will cost state schools and colleges £848 million from September 2019 to March 2020.

A DfE consultation was launched in January on plans to fund the increase and it has now been confirmed that colleges will receive the extra funding based on their individual TPS costs, while schools will receive the money on a per-pupil basis.

There will also be an accompanying Supplementary Fund worth £22 million to ensure that any school facing a shortfall from the formula grant of more than 0.05 per cent of its overall budget can claim extra money.

Julia Harnden, funding specialist at the Association of School and College Leaders, has welcomed the news. She said that without this extra funding, the “extremely serious financial pressures” faced by schools would have been exacerbated.

She continued: “We note that for schools, the funding will be allocated on a per-pupil basis and we are pleased the government has listened to our representations by providing a Supplementary Fund to ensure that where this method of distribution does not match the amount of money needed, there will be an extra allocation available.

“It is important to understand that this funding announcement is for one year and that we do not know what will happen over the additional cost of the TPS in subsequent years. This will be a matter for a Spending Review planned by the government this year which will set departmental budgets for the next three years.”

However, ASCL is concerned after comments from the chancellor suggested that the Spending Review will only take place if an EU exit deal is agreed. It says that because of this, there is continuing uncertainty for schools and colleges over their long-term budget-planning,

Ms Harnden added: “This uncertainty needs to be settled sooner rather than later. At a time of huge financial pressures, budget planning based on assumptions alone is yet another intolerable strain. Schools and colleges need improved funding and they need it now.”

The DfE has published additional information about how the pensions funding is to be delivered (April 2019). The Education and Skills Funding Agency (ESFA) will pay the funding for maintained schools to local authorities, who will be required to pay it to individual schools at the rates published. Funding for academies will be paid at the published rates directly by the ESFA.

Education secretary Damian Hinds said: “The TPS is, quite rightly, one of the most generous pension schemes in the country. It’s one of only eight guaranteed by the government because we believe it is important that we continue to offer excellent benefits to attract talented teachers.

“To illustrate how this scheme compares to others available: a teacher who joins the pension scheme at 23 and follows a typical career path could expect to accrue a pensions product worth around £600,000.”


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