Most public service pension schemes are unfunded defined benefit (DB) pension schemes, meaning that members’ pension benefits are guaranteed by the government and there is no fund of assets from which pension benefits are paid.
Every four years, the Government Actuary’s Department carries out a valuation of all unfunded public service pension schemes, including the Teachers’ Pension Scheme (TPS). The TPS 2020 Valuation Report was published last Friday (27 October 2023) and sets out the results of the actuarial valuation of the TPS as at 31 March 2020.
The two main outcomes are:
- An increased Employer Contribution Rate – where employer contributions will be increasing by 5% to 28.6% of pensionable pay next April 2024. A levy of 0.08% of pensionable pay is also payable by employers in order to meet the cost of administering the scheme
- No changes to individual employee contributions – this means members will continue to pay the same % into their pension scheme for 2023/24, with employee contributions staying the same until 1 April 2025.
As there is no breach of the cost control mechanism then there is no requirement for the secretary of state for education to consult on changes to the scheme.
For our members managing the budget, the government confirmed back in March that it would fund the increased employer costs to support employers that are centrally funded. We expect that this will be in the form of a grant in 2024/25, as we’ve seen in previous years.
We are pressing the government to provide detail on how and when this additional funding can be expected as soon as possible, to support members with their budget planning.
It remains the case that independent schools that participate in the scheme will be expected to meet the additional costs involved from their income. For members in independent schools, we have additional advice to support you.
Considering the longer term, the government has confirmed that for future years, the costs will be covered within spending review considerations for 2025/26 onwards. NAHT will continue to make the case for any additional costs to be fully funded, to reflect the ongoing budget pressures that schools are facing. You can access further details on our funding campaign here.
For devolved administrations, the Barnett formula will apply in the usual way.
First published 30 October 2023