The UK’s new Labour government has been urged to tackle the “massive financial strains” created by the rising costs of the Teachers’ Pension Scheme (TPS) before more universities try to opt out of the system.
A steep rise in employer contributions to the scheme – typically offered by post-92 universities – from 23.68 per cent in England and Wales to 28.68 per cent has “exacerbated” an “already challenging financial environment” for higher education, said Rachel Hewitt, chief executive of MillionPlus, which represents modern universities.
Ms Hewitt, along with other sector leaders, has called on Labour to “urgently review pension legislation to ensure equity across pension arrangements”.
In a bid to tackle the rising costs, the University of Portsmouth plans to employ new members of staff via a subsidiary company so they will no longer be able to access the TPS, pointing out that post-92 universities face employer pension costs up to 15 per cent higher than those costs for the Russell Group universities. The University and College Union (UCU) said it would resist the plans, threatening potential strike action.
Steve West, vice-chancellor of the University of the West of England, said that it costs TPS universities “much more” to employ academic teaching staff than other institutions, making it more likely that other universities will take action like that seen at Portsmouth.
“The issue is that, until there is a change in the legislation regarding the TPS pension, those universities that offer it are legally bound to continue to offer it,” Professor West said.
The “only way out” of TPS arrangements is through subsidiary companies or to outsource services, he said, adding: “I know that there are other universities that have already gone down a similar path for academic and research staff.”
“It is clear that the financial pressures on universities are leading to more focus on reducing costs, and it is not surprising that pay and pension cost controls are an important part of action being taken,” Professor West added.
Alasdair Smith, emeritus professor of economics at the University of Sussex and former vice-chancellor of the university, said that higher education institutions will “inevitably” look for cheaper pension options, and may “try to offer salary incentives to give up their TPS membership”.
Meanwhile, Linda Merrick, principal at the Royal Northern College of Music and chair of Conservatoires UK, said “should employer contributions to the TPS continue to rise exponentially in coming years, then we may have no alternative than to review our position as regards the scheme”.
She called on Labour to explore options to support universities with employer contributions, as higher education institutions will “struggle to absorb these additional costs without it having a detrimental impact on the student experience”.
Raj Jethwa, chief executive of the Universities and Colleges Employers Association, said it was “completely unfair” that schools and further education bodies have been awarded greater funding to support the increases, “while HE institutions are forced to make cuts elsewhere to fund their ongoing participation in a scheme they are obliged to offer by law”.
Mr Jethwa added “we now urgently need ministers to take forward the long-promised review of HE participation in the TPS”.
