UK Government Leaves Universities on Their Own to Deal with Increased Public Pension Costs

The United Kingdom is removing universities from its list of education institution that require additional government funding to help deal with increasing costs to fund the teachers’ pension scheme [TPS] next year.

The government in essence said that universities did not need the funding as much as other educational institutions. “The department [of education] conducted an analysis on each sector, which suggested that state schools and further education colleges were in high levels of need for additional support [relative to universities],” according to a report from the UK Department of Education.

The University and Colleges Employers Association [UCEA] argued that recently founded universities have relatively lower levels of reserves, and substantial cuts to their budgets “will require redirecting funds away from student services and investment plans. The increase in pension contributions [could] leave institutions little choice but to respond through reductions in headcount in order to meet the additional cost.”

Stalwart opponents of the government’s decision opined on the ruling, with the acting general secretary of the University and College Union Paul Cottrell calling it “deeply worrying” in a statement. “The government is wrong to be relaxed about the potential financial problems that its decision will cause. We are seriously concerned about the impact the decision could have on staff and students, especially as many of these institutions are crucial drivers of social mobility,” Cottrell said.

The employer contribution that colleges, schools, and post-1992 universities pay to the TPS will rise from 16.48% to 23.68% in September 2019, an increase of more than 40%.  One of the key factors behind the increase is a reduction in the discount rate in valuations carried out by the government actuary, from CPI 3% to CPI 2.4% from 2019 onwards. The increased contributions are expected to amount to an estimated £5.7 billion in extra costs for employers.

The UK government will now determine the appropriate allocation mechanism for distributing funding to state-funded schools and further education institutions. At the end of 2018, the department of education consulted about providing £830 million to schools and £80 million to colleges.

The country’s University Alliance argued that remedial funding should, at least on a transitional basis, be made available in the future to universities afflicted by the increased scheme costs.