Universities told to expect TPS employer contribution rate fall

Universities have been told to expect employer contribution rates for the Teachers’ Pension Scheme (TPS) to fall, but remain in the dark about how much by or when further information will be announced.

Post-92 universities have been lobbying the government to lower TPS contributions, which currently stand at 28.68 per cent. Universities are legally required to offer the TPS, but unlike schools and colleges, receive no additional support to contribute to the costs. 

Universities say that the contributions are unsustainable, and many have established subsidiary firms to employ staff with different pension terms to cut down on their costs.

But Times Higher Education understands that the government will allow employer contribution rates to come down next year, and post-92 universities have been informed of the expected announcement.

Northumbria University wrote to staff on 29 April saying it had received advice from the Universities and Colleges Employers Association (Ucea) about “the likelihood of a reduction in the employer contribution rate for TPS from April 2027, which was discussed in a recent meeting of the TPS Scheme Advisory Board”.

The email added that universities are still in the dark about the changes, saying “future TPS employer contribution rates remain unknown, with the position from April 2027 unlikely to be confirmed until later this year, and precise timescales are yet to be provided”. 

Northumbria pointed staff to a blog released by pension policy specialists First Actuarial on the Superannuation Contributions Adjusted for Past Experience (SCAPE), which helps determine TPS contribution rates.

The blog said that a change in SCAPE rates means employer contributions are expected to go down, “potentially materially”. 

It is understood that the final position will not be confirmed until the Treasury has announced the SCAPE discount rate, but it is unclear when this will happen.  

Concerns have also been raised that post-92 universities need clarity as soon as possible, as many are in the process of developing alternative staffing arrangements as they look to disentangle themselves from the TPS.

The news is expected to have implications for universities that have already made drastic changes to their pensions.

At Northumbria, staff were offered a one-off payment in return for switching from the TPS to the Universities Superannuation Scheme, which has a far lower contribution rate of 14.5 per cent, as the university looked to save £11 million in pension costs.

Staff would then move to a system of “reward envelopes” based on an employee’s total salary and their employer pension contributions. Staff that chose to remain on the TPS were told that they would have their pay frozen until the value of the total reward envelope between colleagues had “equalised”.

However, the university has now told staff that a fall in TPS employer contribution rates will “shorten the time it will take for the total reward envelope to equalise, from which point future TPS salaries could start to increase again”. 

The Treasury and Northumbria University have been approached for comment.

juliette.rowsell@timeshighereducation.com