Teachers’ Pension Scheme Contribution Increases
Starting next month, teachers will see an increase in the amount deducted from their salaries for participation in the Teachers’ Pension Scheme (TPS). For the most senior educators, the contribution rate will rise to 12 percent of their salaries. This change marks a significant shift in the financial landscape for teachers, who, along with other public-sector employees, benefit from defined benefit (DB) pensions. This system guarantees a fixed annual payment in retirement based on a predetermined formula, rather than accumulating savings in a personal pension pot.
The TPS is not becoming more beneficial with these changes; rather, teachers will be required to allocate a larger portion of their salaries to maintain their membership. This adjustment represents the first revision of employee contribution rates in a decade.
For an educator earning a typical salary, the increase is likely to result in an additional cost of approximately £100 per year. Contributions from both schools and employees are essential for funding the pensions of current retirees. The increase in contribution rates is intended to bolster the financial sustainability of these pensions.
In contrast, private sector employees are only mandated to contribute a minimum of 5 percent of their qualifying earnings into a pension scheme to receive employer contributions, as stipulated by auto-enrollment regulations. Teachers, however, are required to contribute significantly more, reflecting the more generous benefits they receive upon retirement.
- Beginning April 1, almost all teachers, with the exception of the lowest-paid, will see an increase of 0.3 percentage points in their salary contributions to the TPS.
- The table below illustrates the current contributions teachers make versus the new rates effective next month.
The recent changes were initially proposed by the government in 2024 and have been confirmed following a public consultation process. This is the first time in ten years that teachers are being asked to contribute a higher percentage of their salaries.
Pension experts have indicated that many teachers will likely perceive this adjustment as a reduction in their take-home pay. Katy Hayes, principal at consultancy Barnett Waddingham, remarked, “There has been considerable discussion regarding the rising costs of the TPS for schools and higher education institutions, but it was presumed that teacher contribution rates would remain unchanged due to prior commitments from the TPS.”
She further explained, “This is the first increase in employee contribution rates since 2015. While the rise is deemed necessary to meet the required level of contributions, it is hard to view this as anything other than an added financial burden for teachers, especially during a time when the sector is already facing numerous financial challenges that could affect staff salaries and benefits.”
Hayes also highlighted the added pressure this change places on payroll departments to ensure accurate implementation of the new contribution rates.
Historically, public-sector pensions were even more favorable than they are today, which is why the TPS requires additional funding to maintain its sustainability. In 2024, the employer contribution rate—representing the amount schools pay for their employees to participate in the scheme—was increased from 23.68 percent to 28.68 percent. This rise followed a series of increases in recent years, leading many private schools, which traditionally offered TPS membership to their staff, to withdraw from the scheme.
Additionally, a group of state schools has proposed offering educators the option of higher salaries in exchange for opting out of the TPS, favoring a defined contribution (DC) pension instead, similar to what is commonly found in the private sector.
