Question to the Department for Education:

To ask the Secretary of State for Education, whether she has made an assessment of the potential merits of expanding the scope of Teachers' Pension Employer Contribution Grants to include Higher Education institutions in the context of increases in Teachers’ Pensions Scheme employer contributions.

The Teachers’ Pension Scheme (TPS) is one of the best pension schemes available. It is a defined benefit scheme, which means that members receive an index-linked income in retirement, that it has a large employer contribution element, and that it is underwritten by HM Treasury.

The arrangements for valuing public service pension schemes, like the TPS, recognise that there are a wide number of factors that affect the cost of providing the benefits involved, and those factors are subject to regular change, including longevity, member behaviour and economic performance. Reviewing those factors every four years, which is in line with practice for similar pension schemes, is necessary to ensure that the contribution rate employers pay reflects a reasonably up-to-date view of costs, including for higher education (HE) providers. There would be limited value in seeking to forecast likely costs beyond that because of the potential for the wide range of factors involved to change, and therefore there are no plans to make such forecasts currently.

In recognition of the cost pressure a potential increase to employer contribution rates would bring to existing departmental budgets, on 30 March 2023 the Government announced its commitment to providing funding for employers whose employment costs are centrally funded. HE providers are not covered by this commitment. This is consistent with the decision to not fund a similar TPS cost increase in 2019. The Department expects the 2020 TPS valuation to be completed and revised employers’ contribution rates to be confirmed in September 2023. At this point it will be possible for HE providers to accurately assess how any changes in employers’ contribution rates may affect budgets.

The Department recognises that, while the Office for Students’ annual report on financial sustainability finds that university finances generally remain in good shape, there remains a wide spread of financial performance across the sector. The Department, along with HM Treasury, recognise the importance of this issue, and will continue discussions about the implications for HE providers. The Government will confirm its position on this issue in due course.