Teacher Pay Awards and TPS contribution changes: What schools need to know

6 July 2026

Schools and other education employers are facing a notable shift in staff cost planning, with confirmed teacher pay increases from September 2026 and a significant reduction in Teachers’ Pension Scheme employer contribution rates from April 2027.

While the lower pension rate may reduce direct employment costs, the overall budget impact will depend on each education employers funding position, sector and workforce profile.

At a glance:

Teachers in England to receive a 3.5% pay rise from September 2026.

TPS employer contribution rates will reduce from 28.6% to 17.6% from April 2027, excluding the 0.08% administration levy

Teacher pension benefits remain unchanged

Schools have been given greater clarity over future staffing costs following the announcement of new teacher pay awards and a significant reduction in Teachers’ Pension Scheme (TPS) employer contributions.

While schools will need to accommodate higher pay costs over the next two years, the reduction in pension contribution rates from April 2027 will be an important factor when planning future workforce and budget costs.

Teachers to receive pay increases over two years

The Government has confirmed a multi-year pay settlement for teachers, designed to provide greater certainty for schools and education staff.

The deal follows several years of pay awards aimed at improving recruitment and retention across the profession, while helping salaries keep pace with inflationary pressures.

Teachers’ employer pension contributions to drop significantly

Perhaps the most significant financial change for schools comes in April 2027, when TPS employer contribution rates are due to fall substantially.

Until March 2027: 28.6%

From April 2027: 17.6%

This reduction follows the latest valuation of the Teachers’ Pension Scheme and represents one of the largest decreases in employer pension costs seen in recent years.

What does this mean for schools?

For employers participating in the Teachers’ Pension Scheme, the lower contribution rate will reduce the direct pension cost associated with eligible teaching staff from April 2027.

Will teachers lose any pension benefits?

No. The reduction in employer contributions does not affect the pension benefits teachers earn.

Members will continue building pension benefits under the existing scheme rules, with the valuation simply determining how much employers need to contribute to support future pension commitments.

Why are contribution rates falling?

The reduction is primarily linked to changes in the assumptions used to calculate the future cost of public sector pensions.

It is not the result of reduced benefits, changes to teacher membership, or cuts to the scheme itself.

In simple terms, updated government valuation assumptions have lowered the estimated cost of providing future pension benefits, allowing employer contribution rates to be reduced.

A positive development, but not a permanent guarantee

While the new contribution rate is expected to remain in place until March 2031, schools should avoid assuming that pension costs will remain at this level indefinitely.

TPS contribution rates are reviewed periodically and future valuations may lead to increases or decreases depending on economic assumptions and government policy at the time.

Looking ahead

The next two years will bring higher teacher salaries alongside a significant reduction in TPS employer contribution rates from April 2027. For education employers, the key will be understanding the net impact across pay, pension costs and funding arrangements, rather than looking at any one change in isolation.

While the lower TPS rate is a positive development for pension affordability, schools should continue to plan carefully, particularly as contribution rates remain subject to future valuations and could change again after March 2031.