DfE launches consultation on plans to fund £80m college pension contribution increase

The Department for Education is consulting on plans to provide extra funding to cover the estimated £80 million rise in pension contributions for FE colleges in 2019-20.

It was announced last year that the amount colleges and other public-funded FE training providers must contribute to staff pensions is to rise from the current rate of 16.48 per cent to 23.6 per cent from September.

The DfE has now launched its promised consultation on plans to fully fund the increase in its first year – which it estimates will cost £1.1 billion across the whole education sector.

The pledge will cover the 2019-20 year, after which any further funding would rely on the government’s spending review.

The DfE is proposing to cover the initial £80 million cost to FE providers, which covers FE colleges, sixth form colleges, specialist post-16 institutions and adult and community learning providers.

Its consultation says: “The department know colleges are in a financially challenging environment.

“Although by 2019-20 the funding available for apprenticeships in England will have risen to over £2.5 billion and the adult education budget protected in cash terms since the last Spending Review.

“We want a financially sustainable sector, which is why we have already invested in restructuring of colleges.

“The government recognises that not funding the increased employer contributions would increase financial pressures that could undermine investment already made and influence, for example, colleges’ ability to recruit and retain the teachers they need.”

The DfE has confirmed in its proposals that it won’t cover the rise for private schools or the higher education sector. It said while it “values” these sectors and is “committed to seeing them thrive”, schools and colleges are in “high levels of need for additional support”.

FE providers have until February 12 to give their feedback.

The DfE has previously said changes to the teachers’ pension scheme will cost colleges an extra £142 million a year in employer contributions after 2019-20.

Julian Gravatt, deputy chief executive of the Association of Colleges, previously said the figure 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.

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