University leaders have warned that “eye-watering” increases in employers’ pension contributions could force institutions to cut student support or even move to depart the Teachers’ Pension Scheme (TPS) altogether.
From 1 April next year, employers’ TPS contributions will increase by 5 percentage points, which is expected to cost institutions £125 million a year collectively. The government recently confirmed that English higher education institutions under the TPS will not receive the financial assistance available to schools, although aid for Scottish, Welsh and Northern Irish universities has yet to be ruled out.
Raj Jethwa, chief executive of the Universities and Colleges Employers Association (Ucea), said the new 28.68 per cent contribution rate threatens the sustainability of institutions that are already under significant financial pressure, noting that the TPS is now “one of the most expensive schemes certainly in the sector, but probably across the wider economy”.
Calling the lack of financial assistance “unfair”, Mr Jethwa said a “longer-term settlement” was essential for institutions to remain in the scheme.
The second-largest pension scheme in British higher education, TPS is used primarily by post-92 universities, while older institutions typically use the Universities Superannuation Scheme (USS). Employer contributions to the latter scheme will drop from 1 January, from 21.6 per cent to 14.5 per cent.
Sir Steve West, former president of Universities UK and vice-chancellor of the University of the West of England, called the TPS contribution increases “completely unacceptable” and “anti-competitive”, putting post-92 universities at a disadvantage at a time when institutions are already facing rising costs because of inflation.
Facing a yearly cost increase of £3.5 million, his institution would be forced to cut expenditures such as outreach and participation, Sir Steve said, while hardship funds for students struggling during the cost-of-living crisis could also be under threat. “It will directly have an impact on staff and our student body, and that feels particularly unfair and unacceptable,” he said.
Post-92 universities will be unable to offer a “competitive salary and benefits package”, dissuading potential academic staff, Sir Steve said, noting that the contributions increase will not increase the pension available to individuals.
Specialised performing arts providers will also struggle to attract staff, said Linda Merrick, principal of the Royal Northern College of Music and chair of Conservatoires UK. “If we decrease the quality of tuition […] we will simply cease to be internationally competitive,” she said. “This will be a cut too far.”
Vivienne Stern, chief executive of Universities UK, said post-92 universities would be left, “through an accident of their history”, at a “financial disadvantage” because of the TPS contribution increases. Citing a “structural deficit” in the funding of higher education that sees universities lose money on teaching domestic undergraduate students, she said universities using TPS would be “competing with one hand tied behind their back”.
Sir Steve said he was still attempting to negotiate with the Treasury – “never say never”, he said – but he suggested that institutions could seek a more permanent solution in the long term. “We need to come out of the scheme. We need an alternative,” he said.
