Guidance

Teachers' pension scheme employer contribution grant: further education providers academic year 2025 to 2026

Updated 5 March 2025

Applies to England

Introduction 

This grant provides funding to further education (FE) providers to cover increased employer contributions to the teachers’ pension scheme (TPS). It covers the rate change from 16.4% to 23.6% in September 2019 and the increase to 28.6% in April 2024. The funding for this started in the 2019 to 2020 academic year. This guidance confirms the arrangements for the 2025 to 2026 academic year.

Change for 2025 to 2026

When considering the expected cost of employer contributions in 2025 to 2026 at the 28.6% rate, we take into account the estimated average increases in earnings in the years between the data being used and the funding allocation year.  What we have not done previously, is to recognise that if the pensions rate was still at 16.4%, those lower contributions would also have risen in line with estimated average earnings.

To account for this, from 2025 to 2026 we are changing the methodology to also uplift the employer contributions at the 16.4% rate by the estimated average increases in earnings in the years concerned. Whilst we expect to retain this change for any future allocation calculations, we will keep it under review.

Eligibility

The following types of FE providers 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 16 to 19 and/or adult skills 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.

Calculating and making payments

2025 to 2026 academic year 

We  will use the 2023 to 2024 financial year audited payments made by providers to Capita for the 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, we will do this by dividing the total payments made by 23.6 and multiplying by 16.4 

• an adjusted annual total that would be the equivalent amount if the 28.6% rate had already applied, we will do this by dividing the total payments made by 23.6 and multiplying by 28.6 

We uplift both these adjusted annual total figures by 4.7% and then again by 3.6%, to reflect estimated average earnings increases in 2024 and 2025 respectively. This calculates the employer contribution values for 2025 to 2026 by accounting for changes in earnings between 2023 to 2024 (source data year from Capita) and the funding year for the grant, 2025 to 2026.

The grant provides funding for the difference between the calculated employer contribution values for 2025 to 2026 at the old rate (16.4%) and the new rate (28.6%).

We use the estimated average increases in earnings from the October 2024 economic and fiscal outlook  published by the Office for Budget Responsibility (OBR).

We will pay the funding in 2 separate payments:

• September 2025 for the 8-month period from August 2025 to March 2026, the amount will be 66.67% of the full-year figure

• April 2026 for the 4-month period from April to July 2026, 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.

We will confirm payment amounts for providers that receive 16 to 19 funding alongside their 16 to 19 funding allocation for academic year 2025 to 2026. We will communicate funding amounts for all other providers by email.