Teachers Pension Scheme - Employer contribution rate
27 Nov 2018
Updated 18 April
The DfE have confirmed the outcome of the recent consultation on their proposed funding of the increase for teachers’ pensions employer contributions. In summary they confirmed that the government will fund these increases for 2019/20.
Read the full consultation response (GOV.UK)
In addition the government has published guidance on the pension grant methodology (GOV.UK)
The DfE have summarised some key points of the grant methodology:
For mainstream schools, we will use the following data:
- 2-4 year olds: headcount of funded places from January 2019 census
- 5-16 year olds: headcount from October 2018 census
- 16-19 year olds: pupil numbers from 2019/20 academic year allocations. These have been converted into a full time equivalent (FTE) based on the number of hours each student attends the school.
For special schools, we will use the following data:
- Maintained: place numbers from the 2019-20 financial year budget returns (section 251)
- Academies: the published high needs place numbers for 2019/20 academic year.
Original news item
On 6 September, HM Treasury published draft directions to be used in the valuation of public service pension schemes.
The Government Actuary’s Department has now completed their calculations to provide indicative results of the 2016 valuation of the Teachers’ Pension Scheme (TPS) to the Department for Education (DfE).
- Implementation of the change to the employer contribution rate will be 1 September 2019 (rather than 1 April 2019) due to the delay in this announcement
- The current employer contribution rate of 16.48% will be increasing to an estimated employer contribution rate of 23.6%, for the period 1 September 2019 until 31 March 2023
- The biggest impact on the employer contribution rate is the change to the SCAPE* discount rate that is used to assess the current cost of future benefit payments; the SCAPE rate will change from CPI + 2.8% to CPI + 2.4% from April 2019
- There will be funding from the DfE for the financial year 2019/20 to help maintained schools and academies meet the additional costs resulting from the scheme valuation, a consultation process will take place to determine final funding arrangements. Funding for 2020/21 onwards will be discussed as part of the next Spending Review round.
- The SCAPE discount rate sits outside employer cost cap process that was introduced for the 2015 career average TPS as this is a financial assumption. The indicative result also shows that the cost cap has been breached due to the value of member benefits having fallen, this is due to assumptions about earnings (pay increases lower than expected) and reduction in life expectancy. Discussion will take place with the TPS Scheme Advisory Board to recommend changes to the scheme design for career average section members of the TPS to align member costs to the cost cap.
* What a SCAPE rate is (Parliament.UK)