Universities in England are dealing with a £125mn hit to their budgets within the subsequent tutorial yr on account of little-publicised modifications to how pension contributions will probably be calculated.
About 80 universities and schools, members of the so-called “post-92” group of newer establishments using round 110,000 employees, will probably be affected by the modifications that apply to the Academics’ Pension Scheme.
The problem is the newest pensions-related drawback to hit UK universities in recent times. Final yr the Universities Superannuation Scheme (USS), the most important greater training pension fund, reduce advantages for employees to plug a gap in its funds, sparking protests and strikes by teachers.
“It can put an amazing pressure on establishments,” mentioned Graham Baldwin, chair of Million Plus, an organisation that represents newer universities. “Universities are setting their budgets they usually’re already tight.”
Million Plus estimates that the general price of the elevated contributions for the schools affected for the 2024-25 tutorial yr would whole about £125mn.
A change in actuarial assumptions used to calculate employer contributions for TPS and different unfunded pensions schemes will improve the associated fee to employers by 5-10 per cent within the subsequent tutorial yr, in accordance with unions specialising within the sector.
With budgets already stretched, some universities will probably be compelled into deficit or to make job cuts, college leaders mentioned. The change comes at a time when many establishments are already grappling with the cost of living crisis and calls for for greater pay from hanging employees.
The change affecting the Academics’ Pension Scheme was introduced by the federal government in March and can impression quite a few publicly funded organisations from April 2024.
The federal government is to decrease the low cost charge used to worth the price of pensions for greater than 5mn public sector staff in “unfunded” retirement schemes. Because the low cost charge lowers, the prices of “outlined profit” pension guarantees improve, sometimes leading to greater pension payments for employers.
These working in additional or greater training in England and Wales will often be in both the TPS or the USS. They could even be provided a pension with a neighborhood authorities retirement scheme.
Baldwin mentioned the College of Central Lancashire, the place he’s vice-chancellor, presently contributes 23.6 per cent of pay on pensions however this was set to extend by 5-10 share factors on account of the change. The rise would add between £3.5mn and £7mn to its annual prices.
Universities UK, which represents the upper training sector, mentioned universities’ potential to regulate their budgets in response to the rise was “very restricted”.
Steve West, vice-chancellor of the College of the West of England, mentioned its prices would rise by about £5mn subsequent yr. “Which means that we can have no possibility however to take fairly vital steps inside our payroll and inside our non-pay [budget] to stabilise the establishments,” he mentioned.
The Institute for Fiscal Research think-tank estimated the change would add “billions” to public sector employer pension prices.
The Treasury has pledged to compensate centrally funded establishments similar to colleges for the additional prices however different employers, similar to universities, must fund the rise themselves.
Prospect, the civil service sector union, mentioned the impression of the low cost charge change can be “very vital” for some employers, who might see their prices go up by as much as 10 per cent of pay.
Nationwide museums and charities providing most cancers care is also excluded from the Treasury provide to reimburse greater pension prices, mentioned Prospect.
The Division for Schooling has been contacted for remark.
