The Chancellor’s 2023 Autumn Statement contained many significant announcements affecting pensions. Plans for fund consolidation from the Mansion House speech, confirmation of the abolition of the lifetime allowance from 2024/25, and the reduction in the tax on surplus payments to sponsoring employers of schemes to 25% all received a lot of attention. Amid all of the discussions in the pensions press and the industry at large, the confirmation in the Autumn Statement of a change to the discount rate (known as the SCAPE rate) used by the UK Government for valuing liabilities in all public sector pension schemes has received much less public attention.

Employers within the Teachers’ Pension Scheme (“TPS”) will, however, be well aware of the impact of this change: the outcome of the 2020 TPS valuation (based on the new SCAPE rate) is that the contribution rate for sponsoring employers in England and Wales will rise by 5 percentage points to 28.6% from April 2024.

While the Department for Education (“DfE”) has committed to providing additional funding for directly funded scheme employers (such as mainstream schools, post-16 settings and high needs settings) for the financial year 2024/25, to cover the cost of these increased rates, and independent schools have the option of transitioning out of the TPS, the position is very different for “post-1992” universities and higher education providers.  

Due to the Further and Higher Education Act 1992 and the TPS regulations, post-1992 universities have no choice but to participate in the TPS, and do not have the option to withdraw (absent a restructuring of their employment arrangements – itself not without complication). Because they are considered to be autonomous bodies, they also do not benefit from the additional funding the DfE has promised to directly funded employers. 

This could leave post-1992 universities in an uncomfortable position: it is estimated that the collective annual cost to post-1992 universities of the contribution increase will be in the region of £125 million. Several institutions have called for reform. The University Alliance (all of whose members will be affected by the increase)  lobbied the government ahead of last year’s Autumn Statement to reconsider the planned increase, and to insist that the government “urgently review” the 1992 Act to make such participation in the TPS optional.  Meanwhile, Sir Steve West, vice-chancellor of the University of the West of England, has called for the DfE funding given to directly funded employers to be offered to post-1992 universities.

In the meantime, affected universities will want to manage the impact of the increased rates on their institution, and may be starting to think about what (if any) options are available to them within the constraints of the current statutory regime.  

If you would like to speak to someone about how these changes might affect your institution, or discuss the options that might be open to you, please do get in touch.

This post was written by Amy Davies and Hayden Searle