Leaders of English universities have warned that an increase in employer contributions to pensions next year would result in a drastic cut in student welfare and make it difficult to recruit staff.
Teachers in England and Wales are covered by the Teachers’ Pension Scheme, which is 80 universities and colleges. The TPS heads have criticized the government’s planned state pension reforms.
By April 2024, TPS-member institutions will have to increase their employer contributions from 23.6% to 28.6%.
The sustainability of institutions already facing stretched finances is made much more difficult, said Raj Jethwa at a press briefing by leaders in higher education this week.
He said that the Treasury had offered to help schools in the TPS sector with the increase of payments, but not the university sector.
Under the Further and Higher Education Act of 1992, the 80 affected universities were required to stay members of TPS as they transitioned to become private universities from government-run polytechnics.
Vivienne Stern of Universities UK (which represents 140 universities) said that it was unfair to penalize post-92 universities for an “accident” in their history.
She said that pension reforms will distort the market for higher education. “This will put some institutions at a disadvantage in the market. . . “At a time when many universities are struggling to survive, this is a great opportunity.”
More than 1,000,000 students are educated by the post-92 universities. They employ more than 110.000 staff. These institutions are among the least-resourced in the country and are suffering from financial deficits.
Recent warnings from the university sector about structural challenges, as wages and energy costs increase.
According to , an analysis of the Russell Group, the UK’s leading research universities, high inflation has reduced the real value of UK and Irish tuition fees from £9,250 per year to less than £6,500.
The University of the West of England Vice-Chancellor, Sir Steve West, who has a turnover of £380mn per year, stated that the cost of additional pension contributions for employers will total £1.1mn in the remaining academic year and rise to £3.5mn by 2024-2025.
He said that the university will have to reduce its operational costs in order to pay the money. This includes delaying capital spending plans, reducing discretionary expenses, and outreach activities to attract students from less privileged backgrounds.
He said that the university might have to reduce its hardship fund, which supports those who are least fortunate. This is a tough situation that will affect staff and students.
These changes will also affect smaller institutions such as music conservatories, which have less financial flexibility and therefore less ability to absorb new costs.
Linda Merrick of the Royal Northern College of Music, and chair of Conservatoires UK (an umbrella organization), said that the increased employer contributions would be “incredibly hard” to bear for the sector.
She added, “The unintended consequences of this will be to destabilise conservatoires in UK.” “We are internationally renowned. . . But we only have limited options for absorbing this.”
The University Superannuation Scheme (the main retirement plan for the sector) is set to see a significant reduction in contribution rates, both for employers and employees, due to the improvement in the plan’s financial position.
The Education Department said that because higher education providers are independent from the government, they would not be able to fund changes in the TPS scheme the same as schools and colleges.
The government also provides financial assistance to higher education in the amount of almost £7bn annually, plus more that £10bn annually as tuition loans.