DfE: College pension contributions to rise by an extra £142m per year

The government has confirmed colleges will be expected to pay an extra £142 million a year in employer contributions to the teachers’ pension scheme.

The increase comes into force in September 2019, but as this is half way through the financial year the Department for Education has estimated that colleges will have to pay £80 million extra in 2019/20.

This will increase to the full amount of £142 million in 2020/21.     

The latest estimates were revealed by schools minister Nick Gibb in a series of written answers to parliamentary questions asked by shadow education secretary Angela Rayner.

Julian Gravatt, deputy chief executive of the Association of Colleges, said the figure of £142 million amounts to approximately two per cent of college income.

As colleges already spend an average of five per cent of their income (£350 million) on contributions to the teacher pension scheme, this will take costs up to approximately £500 million, or seven per cent of total income, by 2020/21.

As FE Week reported in September, the AoC previously expected that colleges would face paying an extra £140 million as early as 2019/20, a contribution rise of over 40 per cent. At the time, the DfE would not be drawn on a figure.

The Treasury has said the government will “cover the extra costs” for colleges and schools for the “rest of the spending review”, which runs until March 2020.

In an answer to Ms Rayner submitted on October 16, Mr Gibb said the DfE “proposes” to fund schools and colleges for the increased costs relating to the teachers’ pension scheme and would “shortly” run a public consultation to seek views on this and understand the impact of the changes.

FE providers proposed to receive funding include general FE colleges, sixth form colleges, specialist post-16 institutions and adult and community learning providers.

In an answer to Ms Rayner submitted on October 30, Mr Gibb said it was expected that an extra £1.1 billion would be needed in the teachers’ pension scheme for 2019/20. This would take the form of £80 million from FE colleges, £830 million from state funded schools, £110 million from independent schools and £80 million from affected higher education institutes.

In another answer, submitted on November 6, Mr Gibb said the DfE estimates that the cost of increased employer contributions for 2020/21 would be £142 million for FE providers, £191 million for independent schools and £142 million for higher education institutions.

“Funding arrangements for the increased costs will be considered as part of the next spending review,” he added.

The outcome of a valuation of teachers’ pensions was released in August, which the Treasury undertakes every four years, and suggested public sector workers would get improved benefits from 2019.