Universities and the Teachers’ Pension Scheme

Some universities are required to offer membership of the Teachers’ Pension Scheme to their staff. They have said the scheme’s recent increase in employer contributions will prove financially challenging. They also argue it will place them at a disadvantage to those universities that can offer other pension schemes with lower contributions.

University pension schemes

What is the Teachers’ Pension Scheme?

The Teachers’ Pension Scheme (TPS) is a government-backed pension scheme for staff who teach in schools, colleges, and “post-92 universities” in England and Wales. The equivalent in Scotland is the Scottish Teachers’ Pension Scheme (STPS). Post-92 universities are institutions granted university status since 1992. They are generally former polytechnics.

The TPS is a defined benefit scheme that promises a guaranteed pension income to members in retirement. The level of income is based on factors like a member’s salary and years of service, rather than the contributions made by them and their employer. It is an ‘unfunded’ scheme, which means contributions are paid to the Treasury (which pays out pensions), but they are not held in a specific pension fund.  

Every four years, the Government Actuary’s Department carries out a valuation of the TPS to ensure it can meet present and future obligations. These valuations are then used to set employer and employee contributions. Following the most recent valuation in October 2023, the employer contribution rate increased by over 20%.

See the Commons Library briefing Teachers’ Pensions – 2015 onwards for more information.

What is the Universities Superannuation Scheme?

The Universities Superannuation Scheme (USS) is a hybrid workplace pension scheme for academic staff in UK universities (principally academics in institutions that had university status prior to 1992). In the USS hybrid design, members pay into a defined benefit section of the scheme up to a certain salary threshold. For salary above that threshold, members’ and employers’ contributions are directed into a defined contribution section, in which pension income is determined by factors such as contribution levels and investment returns.

The USS defined benefit section is ‘funded’. Employers and employees make contributions to a fund, which is invested and used to pay pensions at retirement. If the investments are not enough to cover the expected cost of providing the defined benefit pension, then contributions must rise, or the sponsors will need to meet the shortfall (and benefit levels will potentially be reduced).

Regular valuations of the scheme determine the contribution levels needed to provide the defined benefit pension. Following a valuation of the USS in March 2020, a significant shortfall was estimated between the defined benefit section’s income and commitments. This led to a reduction in the future pension benefits employees built up after April 2022 and an increase in member and employer contributions. The changes prompted several years of industrial action by university staff. Through the 2023 valuation of the scheme, however, it became clear the scheme’s financial health had improved, and the previous changes to benefits were reversed, with member and employer contributions reduced.

See the Commons Library briefing Universities Superannuation Scheme for more information.

How do the two schemes compare?

The cost of employer contributions required by the TPS, when compared to those of the USS, has been identified as a particular financial challenge for post-92 universities. The table below sets out how the two schemes compare here and in other areas.

Are some universities required to offer the Teachers’ Pension Scheme?

Universities that were previously polytechnics and gained their university status through the Further and Higher Education Act 1992 are required to offer membership of TPS to their academic staff in line with the scheme’s regulations.  

Polytechnics were previously controlled by local authorities, which operated pension arrangements for their staff in line with the school system. Staff who taught were enrolled on the TPS (which at that time was the Teachers’ Superannuation Scheme, or TSS), and staff who did not teach were enrolled in the Local Government Pension Scheme.  

In 1991, the Conservative government of John Major published a white paper, Higher Education: A New Framework, that set out plans “to end the increasingly artificial distinction between universities on the one hand and polytechnics and colleges on the other.” With regards to pension arrangements, paragraph 104 of the white paper said the government would make regulations to ensure continued membership of the TPS for polytechnics that gain university status. 

The white paper was followed a year later by the passage of the Further and Higher Education Act 1992, which granted former polytechnics degree awarding powers, the ability to use the university title, and access to research funding on the same terms as established universities.  

Continued membership of the TPS for post-92 universities was set out in the scheme’s regulations. The latest regulations are the Teachers’ Pension Scheme Regulations 2014. Schedule 1, part 2 of the regulations detail who is eligible for the TPS, including teachers at post-92 universities (paragraph 15). 

What have universities said about the Teachers’ Pension Scheme?

In October 2023, the Department for Education published the outcome of the latest valuation of the TPS, which was based on 2020 data. It found that the employer contribution rate needed to increase by five percentage points, to 28.6% of salary, to ensure that the scheme continued to meet present and future obligations. This increase came into effect from 1 April 2024. The Higher Education Policy Institute published a blogpost by senior figures at Northumbria University in January 2025 that said the new contribution rates mean TPS members on a typical academic salary of £57,500 cost universities £16,500 a year, compared with only £8,300 for USS members.

The financial sustainability of many higher education providers has come under increasing strain in recent years, following reductions to government grants and undergraduate tuition fee caps not keeping pace with inflation. In November 2024, England’s higher education regulator, the Office for Students, said nearly three quarters (72%) of providers could be in deficit by 2025-26. 

The Department for Education has provided additional funding to cover the contribution increase for those TPS employers centrally funded by the government (for example, local authority maintained schools). However, this funding has not been extended to universities because they are autonomous institutions.

Universities have warned they will have to cut expenditure to meet the additional pension costs, and as a result may have to reduce student support and the amount of outreach work they do. Some in the higher education sector have said the employer contribution increase will put post-92 universities, which are generally less well-endowed than more established institutions, at a competitive disadvantage. A number of post-92 universities have looked to employ staff through subsidiary companies rather than directly, which means they do not have to enrol them on the TPS. This has led to threats of industrial action from unions.

What has the government said?

The Universities and Colleges Employers Association (UCEA) and the University and College Union (UCU) have asked the government for support to mitigate the increase in employer costs related to the TPS. UCEA has also written to ministers to request a review of higher education participation in the TPS.

In letters to the UCEA and responses to parliamentary questions, the government has said it is working with stakeholders to understand the impact the increase in employer contributions is having on some universities, and to find ways to address challenges the sector is facing. The government has said it will set out “a long-term plan for reform” by summer 2025.

On 12 February 2025, the Scottish Government announced it would provide additional funding of £5.83 million to universities following an increase in the employer contributions of the Scottish Teachers’ Pension Scheme from 23% to 26%.

Further reading

• Commons Library briefing, Higher education finances and funding in England
• Commons Library briefing, Teachers’ Pensions – 2015 onwards