Universities are paying 28.6% of academic staff salaries into the Teachers’ Pension Scheme this year. The increase is straining budgets and raising concerns about institutional stability.
The Universities and Colleges Employers Association reported that employer contributions rose to 28.6% for the 2024-25 financial year. That marks a five-point jump from the previous year. The group described the cost as unsustainable and cautioned it could lead to closures.
Costs double those of rival pension scheme
The Teachers’ Pension Scheme now requires nearly twice the contribution rate of the Universities Superannuation Scheme. USS lowered its employer rate to 14.5% at the start of 2024 after previously charging 21.6%.
A study by Northumbria University found that a lecturer earning £57,500 costs their employer £16,500 annually in Teachers’ Pension contributions. The same salary under USS would cost £8,300. The disparity has made it harder for some universities to attract talent, according to the association.
Related: Pabna mental hospital struggles with staff shortages
Only institutions granted university status after the Further and Higher Education Act 1992 must offer the Teachers’ Pension Scheme. Older universities can choose USS or other plans, creating an uneven playing field for newer ones.
Calls for regulatory change grow louder
The association is urging reforms to allow higher education employers and staff to select alternative pension schemes. Other employers already have this flexibility. Chief Executive Raj Jethwa argued there was no valid reason to force universities into the Teachers’ Pension Scheme given the high costs.
“Higher education institutions aim to be desirable employers, and competitive pensions are part of that,” Jethwa said. “The sector faces unfair treatment.”
He noted that schools and further education colleges received additional government funding to offset rising pension costs. Universities have not received the same support. Despite lobbying efforts, no solutions have been proposed.
Related: Budget promises steady policy to reassure investors
The group has requested a meeting with Baroness Jacqui Smith, Minister of State for Skills, to discuss the issue. A parliamentary briefing last month recognized the financial pressures on universities, citing stagnant tuition fees and reduced government grants.
The Teachers’ Pension Scheme, an unfunded public sector pension, had over 2.2 million members and nearly 13,000 employers as of March 2024. Its latest annual report estimated liabilities at £290.7 billion.
The Department for Education has promised to examine the issue but has not provided a timeline or concrete proposals. The association continues to warn that without action, some universities may face closure.
Leave a Reply