Teacher pension hikes could cost schools over £140m
Teachers’ mis-sold pension compensation hikes could cost UK colleges over £142 million. Financing for the increased pension costs is expected to continue until the expiry of the current spending review. The Department of Education (DfE) has pointed out that the rise in employer contribution to the “TPS-Teachers’ Pension Scheme” could cost schools an additional £142 million between 2020 and 2021.
Julian Gravatt, the deputy chief executive for “AoC- Association of Colleges” has pointed out that the TPS employer charges will also increase the colleges’ cost to over £142 million in post-92 universities, and £191 million in private schools.
The cost for schools funded by the state will increase by over £1,275 million. The TPS covers college workers and is part of the UK government arrangements to elevate the employer’s contributions and the reforms are expected to take effect by Sept next year. The rate is expected to increase from 16.4% to 23.6% representing a rise of more than 40%. The next spending review will determine how DfE will finance colleges, maintained schools, and academies.
AoC had issued a stern warning earlier arguing that the increased estimate would adversely affect college budgets, especially in the absence of full compensation for the higher expenses. An elevation in employer pensions in the public sector pensions will affect the college spending in the coming years. Public schools will have to increase £100 million to cover the gap in public sector pensions.
Typically, public schools contribute approximately £350 million yearly to cater for the TPS. Treasury has also issued a notice indicating that the estimated figure could rise substantially. The draft guidelines issued by the Treasury aims to guide the government in its current plans to lower the discount rates applicable to public sector pensions. Experts in the field point out that it is likely to witness another major mis-sold pension compensation lawsuit for UK teachers.
In the recent valuation, the rate was set at CPI-Consumer Prices Index-level of inflation plus 3 % (CPI+3), but the rate could lower to (CPI + 2.4) from next year onwards. Sally Hunt, the General Secretary of University and College Union point that the government needs to invest wisely.
Hunt argues that colleges offer a crucial public service, but the subsequent cuts have led to a decrease in the number of learning opportunities provided. She also pointed out that the government pension changes should ensure that public colleges are left with sufficient funds to run their operations now and in the coming years.
Bill Watkin, the chief executive of the “Sixth Form Colleges Association” has also observed that the FE sector could also face a serious financial crisis, especially if college contributions to teacher pensions are elevated. The valuation of teachers’ pensions happens after every 48 months and has affirmed that the public sector employees will receive improved benefits
towards the first quarter of 2019. Information about the amount to be paid by extra schools has not been provided. However, the UK government has expressed its commitment to cover the potential increased for the 2019/2020 fiscal year.
The Financial Times has pointed out that the overall increased payments in the public sector could hit over £4 billion. Perhaps, the education unions will have to file a mis-sold pension compensation lawsuit if the government fails to roll down a comprehensive plan to cater for the potential increase in employer costs.