TPS employer contribution rate to drop below 20 per cent

Employer contributions to the Teachers’ Pension Scheme are set to fall by 11 percentage points next year, in a move that is expected to save universities millions of pounds. 

Post-92 institutions have long lobbied the government to reduce employer contribution rates to the TPS, which they are legally required to offer. At 28.68 per cent, they argue that employer contributions are well above other sector pension schemes, and have placed an unwelcome financial strain on their institutions. 

But the government has now announced that contribution rates will fall by 11 percentage points from 1 April 2027 to 17.68 per cent, just above the 16.4 per cent rate it was in 2018. 

Times Higher Education previously reported that contribution rates were expected to fall by 5-10 per cent, but the government has gone further still.

Raj Jethwa, CEO at the Universities and Colleges Employers Association, said the announcement provided “welcome short-term financial relief”, and will reduce pension costs by up to £900 million across universities in England and Wales by 2030.

However, he added that “the magnitude of the reduction simply highlights the inherent volatility in TPS, one of the key challenges institutions face when setting and delivering their business plans”. The rate is determined by various government measures and economic expectations. 

While the move presents significant savings for universities, “that figure is modest compared with the scale of the current government’s policy decisions, which have added around £4 billion in costs to the sector”, Jethwa added. 

“We welcome the Department for Education’s engagement and its stated commitment to understanding and addressing the sector’s challenges. Ucea calls on government to address the underlying structural inequalities and create a level playing field for post-92 institutions. 

“The sector now needs the government to act and deliver a sustainable, long-term solution that recognises institutions’ autonomy and supports financial stability.”

juliette.rowsell@timeshighereducation.com