TPS changes to cost employers £150m, UCEA warns

Increasing employer contributions to the Teachers’ Pension Scheme (TPS) will cost employers £150m, which can only be met by “reducing the number of staff”, the Universities and Colleges Employers Association (UCEA) has warned.

In a briefing sent out to MPs, government departments and employers last week, 16 October, UCEA said that the changes will mean an additional £130m in the first year, rising to £150m by 2023.

The changes, based on the 2016 actuarial valuations of public service pension schemes, will mean employer contributions to TPS will rise by 7.2 per cent to 23.8 per cent, and 5.2 per cent to 22.4 per cent for TPS Scotland.

UCEA said: “Universities are knowledge-based industries with a very high proportion of their expenditure necessarily going on staff … it is inevitable that a large and unplanned for cost increase such as the contemplated increase in employer pension contributions to TPS from next September can, for many institutions, only be met by reducing expenditure on staff.

“This, in turn, will result in an inevitable impact on what can be delivered to students.

“UCEA is calling on the Treasury to defer the cost increases while it fully reviews the 2016 valuation and adjustment of the discount rate. It is also calling on the government to be more flexible around the cost cap process and to provide guarantees around funding available to employers in HE to deal with additional costs.”

According to UCEA, it represents 170 higher education organisations across the UK and the changes will primarily impact 70 ‘modern’ universities and 41 university medical schools which offer the NHS Pension Scheme to clinical academics.

Following a review of public service pensions, Chief Secretary to the Treasury, Liz Truss, announced last month that the amount employers pay towards the schemes will need to increase.

“This is because of proposed changes to the discount rate, which is used to assess the current cost of future payments from the schemes, to reflect the Office for Budget Responsibility’s long-term growth forecasts.

“Some increase in costs was anticipated at Budget 2016, which departments and the devolved administrations will need to meet in full. The Treasury will be supporting departments with any unforeseen costs for 2019-20. Further discussions will be taken forward as part of the spending review,” she said.

Other public sector schemes have also felt the pinch, with the National Police Chief Counsel chair, Sara Thornton, stating that the increases could lead to 10,000 fewer officers in the force from 2020/21.

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