Employer contributions to the Teachers’ Pension Scheme (TPS) have risen to 28.6% of salary for the 2024‑25 financial year, a jump of five percentage points from the previous year, prompting the University and College Employers Association (UCEA) to label the expense “poor value for money” for higher‑education institutions.
Comparison with the Universities Superannuation Scheme
The TPS contribution rate now sits well above that of the Universities Superannuation Scheme (USS), which reduced its employer share to 14.5% on 1 January 2024 after previously standing at 21.6%. Research from Northumbria University highlighted the disparity: a staff member earning £57,500 would see £16,500 paid annually into the TPS, whereas an equivalent USS participant would contribute just £8,300.
This gap raises concerns for post‑1992 universities, which must offer TPS membership to academic staff under the Further and Higher Education Act 1992. The association argues that the requirement places these institutions at a competitive disadvantage compared with those that can choose alternative schemes.
UCEA calls for regulatory flexibility
In its recent report, the group urged regulators to permit higher‑education employers and employees greater flexibility to join schemes other than the TPS, a choice already available to many other employers. “Higher education institutions strive to be employers of choice and this includes offering competitive pensions as part of their overall reward package,” said Raj Jethwa, chief executive of the UCEA. “There is no logical reason why institutions should continue to be compelled to participate in the Teachers’ Pension Scheme when the costs are so high and the sector is being treated so unfairly.”
Jethwa also noted that the sector has been lobbying successive governments for financial support to offset the steep increase in pension savings for post‑92 members, a relief that has been extended to schools and further‑education colleges but not to universities.
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Recent parliamentary briefings have highlighted additional pressures on higher‑education providers, including stagnant government grants and tuition‑fee caps that fail to keep pace with inflation. While the Department for Education has allocated extra funding for some employers, universities have not benefited from those allocations.
The government has pledged to investigate the issue further, yet no concrete solutions have been presented. The association has requested a meeting with Baroness Jacqui Smith, Minister of State for Skills, to discuss possible avenues for relief.
As of 31 March 2024, the Teachers’ Pension Scheme counted more than 2.2 million members and 12,911 employers. Its latest annual report estimated unfunded liabilities at £290.7 billion, reflecting the magnitude of the financial challenge.
Steep contribution rates could force some universities to reassess staffing levels or tuition pricing, especially if alternative pension options remain unavailable. The ongoing debate may also influence future policy decisions regarding pension scheme mandates for higher‑education institutions.
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