Colleges could see tens of millions of pounds of the government’s promised increase in 16-18 funding eaten up by the growing cost of pension contributions, sector leaders have warned.

David Moir, deputy principal for finance and resources at Basingstoke College of Technology, took to Twitter this morning to say the increase in the college’s contributions to the Local Government Pension Scheme (LGPS) in April 2020 equated to a third of the extra cash it would receive from the increase in the base rate of 16-19 per-student funding.

“That’s a third of the base rate funding increase gone already,” he said, calling for more funding for the further education sector. Of the £400 million funding increase announced  by chancellor Sajid Javid in August, £190 million was set aside to “protect and increase” the 16-18 base rate.

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Substantial cost

Julian Gravatt, deputy chief executive of the Association of Colleges (AoC) , said that many colleges would face LGPS contribution increases for the last four months of the 2019-20 academic year. He told Tes that colleges were required to offer either Teachers’ Pension Scheme (TPS) or LGPS membership to their staff.

According to the AoC, colleges pay around £320 million a year to the TPS (4.5 per cent of total income) and £420 million a year to the LGPS (6 per cent of income).

A valuation to set employer contributions is underway across a number of LGPS funds at the moment, with contribution rate changes set to be implemented from April 2020. While the Department for Education is supplying £100 million a year to cover the increase in TPS contributions that took effect in September 2019, colleges are expected to meet any LGPS cost increases from their own budgets.

David Hughes, chief executive of the AoC, said “The logic surely is for the DfE to find the funds to pay for this, as they helpfully did for TPS pension contribution increases.”  
A government spokesperson said: “We have committed to covering the full cost of additional payments to the Teachers’ Pension Scheme for further education providers for 2020-21. This is additional funding on top of the recently announced £400m for our sixth forms and colleges.

“It is for colleges and other providers to manage the cost of contributions to the LGPS alongside other staffing costs.”