Colleges hit with pensions bill rise

A 16 per cent hike in employer pension contributions next year could cost the college sector tens of millions of pounds and lead to job losses, it has been claimed.

The Association of Colleges (AoC) said plans to increase employer contributions to the teacher pension scheme could hit individual FE college budgets by an average of £250,000 a-year, and sixth form colleges by £90,000.

The Treasury wants to help plug a £1bn shortfall in public sector pension schemes by increasing college contributions from 14.1 per cent to 16.4 per cent from September 2015.

The AoC has warned it will increase the overall cost of employing a teacher by 5 per cent.

Julian Gravatt, AoC assistant chief executive, said: “There is widespread concern in colleges about the Treasury’s announcement of an increase in employer contributions to teacher pension scheme to 16.4 per cent before the actuarial valuation is published and without any plan to consult. “We calculate that the increase will cost £250,000 for the average FE college and £90,000 for the average sixth form college.

Julian Gravatt, AoC assistant chief executive.
“We calculate that the increase will cost £250,000 for the average FE college and £90,000 for the average sixth form college.

Julian Gravatt, AoC assistant chief executive, said: “There is widespread concern in colleges about the Treasury’s announcement of an increase in employer contributions to teacher pension scheme to 16.4 per cent before the actuarial valuation is published and without any plan to consult.

“We calculate that the increase will cost £250,000 for the average FE college and £90,000 for the average sixth form college.

“In the year after the general election the pension and national insurance rises will increase the on-costs of employing a teacher by five per cent.

“Unless the Department for Education [DfE] also acts to improve 16 to 18 funding, these increases will depress teacher pay and cause job losses.”

East Norfolk Sixth Form College principal Daphne King said: “Whilst this does not represent a cut in funding per se, it will affect our bottom line and is yet another hammer blow for colleges trying to prepare balanced budget projections.

“Sixth Form Colleges have had a series of cuts over the past three years and the cumulative effect combined with this latest increase to pension contributions means some more very tough decisions about our future curriculum offer.”

Lynne Sedgmore, chief executive of the 157 Group, said: “Our view is that on top of other rising pension costs and changes in the pension system this is yet another serious funding issue for FE colleges and will require careful planning to mitigate.”

Association of School and College Leaders colleges specialist Stephan Jungnitz said: “The increase in pensions contribution, together with pay rises and general inflation will create profound difficulties.
“It seems that there is little comprehension in government that you get what you pay for.

“The government’s proclaimed intention of improving quality and raising standards seems like empty rhetoric in the face of rising costs and a spiralling decline in post-16 funding.”

The DfE confirmed the figures, but said the official policy change and announcement had come from the Treasury and would not comment further.

It comes after staff in colleges were warned they could face an increase in their contributions of up to 1.2 per cent

From April, providers will be able to implement an average rise of 0.6 per cent for employees enrolled on the teacher pension scheme.

The DfE has said that although the majority of respondents to a consultation on the planned rise had opposed it, the Department had decided to go ahead with the change anyway.

FE providers are not required by law to implement the “new fair deal” proposals, but the DfE says they can choose to do so.

The changes, if implemented, will mean a member of staff earning £35,000 in the next academic year would take home £174 less, and someone on £50,000 would see their annual take-home reduce by £276.