Government refuses to help English post-92s with pension costs

Post-92 universities in England have expressed their disappointment after the government confirmed that it was refusing to help them foot a bill for increased pension contributions that could top £140 million.

Sector leaders have warned that hundreds of jobs have been put at risk by increases in contribution rates to the Teachers’ Pension Scheme, which has about 43,000 members in 70 post-92 institutions across the UK.

The Department for Education confirmed on 10 April that it would provide £910 million to support English state-funded schools, further education colleges and sixth-form colleges, but nothing for universities.

The department said that it had “noted the additional cost pressures for affected institutions at a time when the sector is facing a number of issues and risks”. But, it said, its analysis indicated that state schools and colleges should be prioritised for support.

Under the proposed changes due to take effect in September 2019, employers will be required to pay an extra 7.2 percentage points of salaries into the TPS, taking their overall contribution rate in England and Wales from 16.48 per cent to 23.68 per cent – a 44 per cent rise.

This is significantly higher than the 19.5 per cent of salary paid by the typically older institutions affiliated with the Universities Superannuation Scheme, which will increase to 22.5 per cent in October 2019 under plans announced in July. Employee contributions for TPS members will remain unchanged.

Universities that participate in TPS said that they had been budgeting for a 2 percentage point rise. The Universities and Colleges Employers Association said that unless employers took “significant steps” to manage these cost increases, “the result will be a doubling of the number of universities in deficit” across the UK.

The total estimated increase in pension contributions to TPS by the 70 universities stands at £142 million.

Alistair Jarvis, chief executive of Universities UK, said the decision not to offset increased contributions was “effectively a stealth tax to boost the Treasury’s coffers”.

“Ultimately, this will have to be paid for by diverting funding from other priorities. Today’s announcement in England is bad news for university students, staff and communities that benefit from universities,” Mr Jarvis said.

“In England, these significant increases in pensions costs come ahead of the imminent publication of funding review recommendations. It is imperative that this review does not lead to further cuts that would lessen the positive impact of universities on the economy and society.”

A DfE spokesman said that, as reported by the Office for Students last week, “the HE sector remains in reasonable financial health overall but we recognise that there will be additional costs to the universities participating in this scheme”.

“The Office for Students will continue to monitor and assess the financial sustainability of HE providers and will work closely with any provider that shows increased risk of financial difficulties,” the spokesman said.

chris.havergal@timeshighereducation.com