Guidance

Teachers' pension scheme employer contribution grant: further education providers academic year 2023 to 2024

Updated 7 March 2024

Applies to England

Introduction

The teachers’ pension scheme employer contribution grant (TPSECG)  provides funding to further education providers to cover increased employer contributions to the teachers’ pension scheme (TPS). The funding for this started in the 2019 to 2020 academic year. This guidance covers the arrangements up to and including the 2023 to 2024 academic year.

Eligibility

The following types of further education (FE) institutions participate in the TPS:

• general FE colleges
• sixth-form colleges
• designated institutions (including the new designated institutions that form part of higher education (HE) provider group structures)
• special post-16 institutions

These providers will receive extra funding for increased employer contributions in each academic year covered by this grant if they receive Education and Skills Funding Agency (ESFA) funding for the same period and data from the relevant financial year shows they paid into the teachers’ pension scheme.

We will treat colleges converting to academies before the start of the payment period as an academy, and they should refer to the guidance for schools. We will treat those converting during a payment period as an academy from the next appropriate payment point.

Local authorities

Local authorities applied to the Department for Education in 2020 to receive extra funding for TPS costs related to their adult community learning providers through a separate process to cover all their centrally employed staff covered by the TPS. This is due to the significant variation in local authority approaches to employing teachers centrally.

In the 2021 to 2022 financial year, additional pension funding that local authorities have claimed for centrally employed teachers has been rolled into the ongoing responsibilities element of the central school services block (CSSB), including for adult community learning providers. This funding was added as a per-pupil amount to the relevant local authority’s per-pupil rate, and is based on local authority claims received in May and June 2020.

Then, for the 2022 to 2023 CSSB allocation onwards, the additional pension funding is included in the baseline per pupil funding for ongoing responsibilities. This element of the CSSB national funding formula is allocated on the local authority’s pupil share adjusted by the area cost adjustment. This is laid out in detail in the 2022 to 2023 CSSB technical note.

Calculating and making payments

2023 to 2024 academic year

March 2024 update, additional funding to support the increase to the employer contribution rate from April 2024

In October 2023, we published the outcome of the valuation of the TPS based upon 2020 data. It confirmed a need to increase the employer contribution rate by 5 percentage points, to 28.6%, from 1 April 2024 to ensure that the scheme continues to meet present and future obligations.

We will allocate additional funding to providers to support the increased employer contributions required from April to July 2024. We will pay this additional funding in April 2024 which will cover the 4-month period from April to July 2024.

To calculate the additional funding, we will use an adapted version of the 2023 to 2024 method described below to re-calculate the FE TPS employer contribution grant to include the additional 5 percentage point increase in employer contribution rates. The additional funding will be a third of the difference between the current and re-calculated grant.

We will upload a revised 16 to 19 funding allocation statement for academic year 2023 to 2024 to document exchange so that providers can see confirmation of their funding.

2023 to 2024 academic year

We will use the 2021 to 2022 financial year audited payments made by providers to Capita for TPS to calculate funding.

We will use the employer pension contributions made at a rate of 23.6% to calculate an adjusted annual total that would be the equivalent amount if the 16.4% rate had still applied, this will enable us to calculate the additional costs because of the increase. We will do this by dividing the total payments by 23.6 and multiplying by 16.4.

Based on this revised annual figure, we will fund the difference between the TPS payments at the old and new rates (16.4% and 23.6% respectively) uplifted by 5.9% and 4.2% to reflect estimated average increases in earnings in 2022 and 2023 respectively.

The estimated average increases in earnings are taken from the November 2022 Economic and Fiscal Outlook published by the Office for Budget Responsibility (OBR).

We will pay the funding in 2 separate payments:

• September 2023 for the 8-month period from August 2023 to March 2024 - the amount will be 66.67% of the full-year figure
• April 2024 for the 4-month period from April to July 2024 - the amount will be 33.33% of the full-year figure

Where providers have merged, we combine the payments made and associate them with the new institution.

Providers that receive 16 to 19 ESFA funding will receive confirmation of the payment amounts alongside their 16 to 19 funding allocation for academic year 2023 to 2024. We communicate funding amounts for all other providers by email.

2022 to 2023 academic year

We used the 2020 to 2021 financial year audited payments made by providers to Capita for TPS to calculate funding.

The change in employer pension contributions came in before the 2020 to 2021 year, so all contributions were made at a rate of 23.6%.

We used these figures to calculate an adjusted annual total that would be the equivalent amount if the 16.4% rate had still applied. Based on this revised annual figure, we calculated the difference between the TPS payments at the old and new rates (16.4% and 23.6% respectively) and applied uplifts of 5.0% and 3.9% to reflect average increases in earnings in 2021 and 2022 respectively.

2021 to 2022 academic year

We used the 2019 to 2020 financial year audited payments made by providers to Capita for TPS to calculate funding.

The change in employer pension contributions came in part way through the 2019 to 2020 year, so we split the Capita payments data into 2 sections as follows:

• the 5 months from April to August 2019, when the old employer contribution rate of 16.4% applied
• the 7 months from September 2019 to March 2020 when the new rate of 23.6% applied

We used these figures to calculate an adjusted annual total that would be the equivalent amount if the 16.4% rate had applied for the full year. Based on this revised annual figure, we calculated the difference between the TPS payments at the old and new rates (16.4% and 23.6% respectively) and applied uplifts of 1.2% and 2.1% to reflect average increases in earnings in 2020 and 2021 respectively.

2020 to 2021 academic year

We used the 2018 to 2019 financial year audited payments made by providers to Capita for TPS to calculate funding.

We calculated the difference between the TPS payments at the old and new rates (16.4% and 23.6% respectively) and applied uplifts of 3.1% and 3.0% to reflect average increases in earnings in 2019 and 2020 respectively. The calculation gave the additional funding that would apply for a full 12-month period.

2019 to 2020 academic year

We used the 2017 to 2018 financial year audited payments made by providers to Capita for TPS with uplifts of 2.6% a year to reflect average increases in earnings since then to calculate funding. This covers the difference between expenditure at the current rate of 16.4% and estimated expenditure at the new, higher rate of 23.6%.

This calculation gave the figure that would apply if the change was in place for a full 12-month period. This was then multiplied by 11/12 to give the extra funding allocated for the 2019 to 2020 academic year - the allocation covered 11 months because the new employer contribution rate came into effect in September 2019.