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Increase to employer contribution rates for the Teachers’ Pension Scheme likely but implementation deferred until September 2019

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Last week, HM Treasury confirmed 'central assumptions' that outline how the valuation of all public sector schemes should be undertaken this year.

The current employer contribution rate for the Teachers' Pension Scheme (TPS) is 16.48 per cent. This was put in place on 1 September 2015, but it is expected to change following the outcome of the next actuarial valuation of the TPS. Early indications suggest that the amount employers pay towards the TPS will need to increase. The exact level of the increase is not yet known, but we expect to have indicative figures shortly.

Following lobbying from NAHT and the other teaching unions, HM Treasury has agreed to defer implementation of the new employer rate until September 2019 to help schools and other employers with financial planning and give sufficient time to make the practical changes needed.

Considering the unforeseen additional costs, the Department for Education will be providing additional funding to maintained schools and academies in 2019-20 to support the implementation. The approach to funding from 2020-21 onwards will then be taken forward as part of the Spending Review. Further information on how this funding will work in practice is still forthcoming, and NAHT will be working closely with the Department on the detail. In particular, we will seek clarity on whether this funding will extend to Wales and cover all roles in schools impacted by any increase to the employer contribution rates for public sector schemes, for example, members of staff in the local government pension scheme and finally what the mechanism will be to provide this additional funding.   

In addition, initial results suggest that the protections of the cost cap mechanism which exists in public sector pension schemes mean members of the TPS career average scheme will receive improved pension benefits for employment from April 2019 until at least April 2023. This mechanism was introduced to offer taxpayers and employees protection from unexpected changes in pension costs due to member-related factors. Where the value of the pension scheme to employees has changed from the levels set when reformed pension schemes were introduced in 2015, steps must be taken to return costs to that level. In this case, the effect of longer than expected pay restraint and a slowing in the rate of improvements to longevity mean that the value of benefits for career average members need to be improved, to bring them back to the value agreed when the scheme was reformed.  We will work with the Department for Education in relation to these improvements to put forward the best possible position for our members.

The final outcome of the valuation and the cost control mechanism will not be fully confirmed until later this year; such uncertainty is unhelpful.  NAHT will be working closely with the other teaching unions to obtain greater clarity and the best deal for our members. 

First published 12 September 2018