A shock increase from September 2019 in the rate of employer contributions to teachers’ pension schemes will force academies already facing financial difficulties into action to survive the extra cost.
Following a review by the Office for Budget Responsibility, the Treasury says the rate of employer pensions contribution will rise to approximately 23.6 per cent of pensionable earnings, which is a rise of around 43 per cent from the current figure.
That will come as a jolt for many academy trusts and could force them into closure in some cases.
Schools will need to urgently review their budgets to see how this will impact on their staffing costs. Even though the Department for Education intends to fund fully the contribution increase for academies for the first year, it is not clear what happens then.
As has been pointed out before in our Academies Benchmark Report, eight out of ten academy trusts are already running an accounting deficit. Cash-strapped and failing single academies are having to sacrifice their independence to join Multi-Academy Trusts (MATs) to survive.
With staff costs already equating to as much as 80 per cent of the total costs of an academy, the rise in pension contributions will hit hard on top of National Insurance Contributions, the National Living Wage, and the Apprenticeship Levy.
If you would like to discuss how this will impact on your academy and what you can do about it, please contact a member of our Academies team.
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