TPS employer contribution rate falls to 17.6% from April 2027

From 1 April 2027, the teachers’ pension scheme (TPS) employer contribution rate falls from 28.6% to 17.6%. For FE colleges and sixth-form colleges, this is a significant change to both costs and the grant funding that offsets them.

The grant and how it works

Since 2019, when TPS employer contributions were raised above the pre-2019 baseline of 16.4%, the DfE has provided a grant to help FE providers cover the additional cost. The grant compensates for employer contributions above that 16.4% baseline.

At 28.6%, the grant covers the gap between 28.6% and 16.4% — a 12.2 percentage point difference on eligible salary costs. At 17.6%, the grant will cover only 1.2 percentage points above baseline. That is a substantial reduction in grant funding.

The DfE’s position is that there will be no overall reduction in the sector’s spending power as a result: reduced grant funding will be matched by reduced pension costs. Providers won’t be worse off in aggregate, but the timing of when the cost change and the grant change land matters for financial planning.

What this means for 2026-27

The rate change takes effect partway through the 2026-27 academic year. The grant for 2026-27 is therefore split:

• August 2026 to March 2027 (8 months): calculated at the current 28.6% contribution rate
• April 2027 to July 2027 (4 months): calculated at the new 17.6% rate

As a result, providers should expect to receive approximately 70% of their initially communicated grant allocation for the full year. The September 2026 payment (covering August–March) will represent roughly two-thirds of the initial allocation; the April 2027 payment (covering April–July at the lower rate) the remainder.

Revised allocation statements will be issued in September 2027 confirming final amounts.

Who receives the grant

Eligible institutions include:

• General FE colleges
• Sixth-form colleges
• Designated institutions (including those within HE provider groups)
• Special post-16 institutions
• Adult and community learning providers within local authorities

Institutions must receive 16-19 and/or adult skills funding and demonstrate TPS employer contributions during the relevant financial year.

Planning implications

The net position — reduced costs offset by reduced grant — should be broadly neutral for most providers. But there are a few things worth checking:

Cash flow timing. The actual reduction in your TPS bill takes effect from April 2027 payrolls. The grant reduction lands in the same month’s payment. If you’ve been forecasting based on your initial 2026-27 grant allocation, revise the April–July 2027 quarter downward.

Staff on TPS who aren’t teaching. The grant is calculated against eligible salary costs. Some of the TPS saving from the rate reduction will accrue to roles that aren’t covered by the grant. Check whether there are any categories of TPS-enrolled staff whose pension costs you’ve been absorbing without a corresponding grant offset.

Budgets already set. If your 2026-27 budget assumed the full initially communicated grant allocation, you need to adjust the second-half projection. The reduction isn’t a cut — it reflects lower actual costs — but it will affect the grant line in your accounts.

Source: Teachers’ pension scheme employer contribution grant: further education providers academic year 2026 to 2027. Updated 8 July 2026.