Hot topics in pensions

TPS employer contribution rate set to drop

Following completion of the 2024 valuation of the TPS, the government has announced that the employer contribution rate will decrease from 28.68% to 17.68% of pensionable pay from 1 April 2027. This 11-percentage-point reduction – the largest in the scheme’s recent history – is driven by changes to the SCAPE discount rate (the government assumption used to calculate the present-day value of future pension benefits). The reduction will not affect member benefits. However, government funding will be reduced to reflect the decreased pension costs.

Action – Employers should review their budgets and financial plans to account for the reduced contribution rate. Plans to move staff into subsidiary companies or introduce alternative pension arrangements may now be harder to justify given the anticipated savings from lower employer contributions. However, employers should remain mindful of the volatility of the TPS contribution rate, driven in part by changes to long-term GDP forecasts. Even with the reduction, the TPS remains more expensive than other schemes in the sector, and employers should still consider their long-term pension strategy. For more information, read our briefing here.

Consultation on amendments to the TPS regulations

Following the latest valuation, the DfE has also launched a consultation on the Teachers’ Pension Scheme (Amendment) Regulations 2027. The draft regulations include small reductions inemployee contribution rates across most salary bands, on the basis that retaining current rates would cause the TPS to exceed the 9.6% yield currently required.The draft regulations also remove the need to re-enrol members into the TPS every three years if they are already members of a qualifying pension scheme (for example, those who have opted out of the TPS and opted into an employer’s DC scheme) “to avoid unnecessary administrative activity”.

Finally, the draft regulations make two clarificatory changes. The first concerns ill-health pensions for “out-of-service” members. The current regulations do not say when their ill-health pension stops. The draft regulations confirm that it will stop once the member starts any gainful employment. The second concerns short-term pensions which are paid for a limited period after a TPS pensioner dies. Currently, these are calculated by reference to the member’s “full retirement earned pension” (or “phased retirement earned pension”), which ignores any reductions made to the pension actually being paid. Under the draft regulations, the short-term pension will instead equal the pension actually in payment at the date of death, which may be lower.

Action – Employers should prepare payroll systems for the proposed contribution rate changes and review automatic re-enrolment processes. As the short-term pension amendments may result in lower payments to beneficiaries, employers should also consider whether communications to staff about their pension benefits need updating.

Financial Handbooks

The DfE has published updated versions of both the Academy Trust Handbook 2026 (effective from 1 October 2026) and the College Financial Handbook 2026 (effective from 1 August 2026). The College Financial Handbook also applies to any subsidiaries forming part of the parent college group.

Both handbooks now require prior engagement with the DfE before introducing any pension scheme other than the TPS or LGPS. Academy trusts “must approach DfE to seek approval early in the planning stage and before any proposed changes are communicated to staff”. Colleges “must consult with DfE before any details are shared with their employees”.

Similarly, prior DfE approval is required for special severance payments where: (i) an exit package of £100,000 or above includes a special severance payment; (ii) the employee earns over £174,000; or (iii) the payment is novel, contentious or repercussive. Importantly, the £100,000 threshold includes pension strain costs – so even where a severance payment is below £100,000, DfE approval is required if the total exit package (including strain costs) is £100,000 or above and it includes a special severance payment.

Action – Employers should understand the new requirement to engage with the DfE before proposing any alternative to the TPS or LGPS and review severance payment processes, noting the £100,000 exit package threshold. For redundancy exercises involving LGPS members aged 55 or over, the strain cost may take an otherwise modest severance payment over the threshold. HR teams should therefore calculate total exit package costs before making offers and obtain DfE approval where required. For more information, read our briefing here.

Changes to normal minimum pension age

From 6 April 2028, the Finance Act 2022 will increase the minimum age at which most pension scheme members can access benefits without incurring an unauthorised payments tax charge from 55 to 57. This is known as the normal minimum pension age (“NMPA”).

Members who had an unqualified right to take benefits before age 57 under their scheme rules on 4 November 2021 (and whose scheme rules included such a right on 11 February 2021) retain a “protected pension age” (“PPA”) of 55.

For schemes referencing the Finance Act definition of NMPA (such as the TPS and the 2015 section of the NHSPS), this change takes effect automatically. This means that members who joined after 4 November 2021  will only be able to access their retirement benefits including redundancy benefits from age 57.

However, the LGPS regulations specify age 55 directly, so regulatory amendments are required to reflect the increase to 57 while retaining the PPA of 55 for members who joined prior to 4 November 2021. The government has consulted on the detail of the proposed amendments and we await its response.

Action – Employers should ensure that member communications reflect the correct NMPA and take account of different PPAs when planning redundancy exercises.

Changes to salary sacrifice

From 6 April 2029, the government will cap the amount of employee pension contributions made using salary sacrifice that are exempt from national insurance contributions (“NICs”) at £2,000 per tax year. When the cap is introduced (based on current NIC rates): (i) employers will pay 15% NICs on amounts sacrificed above £2,000; and (ii) most employees will pay extra NICs (at either 8% or 2% depending on earnings). Contributions via salary sacrifice will still be exempt from income tax (subject to the annual allowance).

Action – Ordinary member contributions to the LGPS and the TPS cannot be paid by salary sacrifice, so these will not be affected. However, the cap will affect employees who pay additional voluntary contributions to the LGPS by salary sacrifice, as well as staff in any defined contribution schemes operated using salary sacrifice. For institutions using salary sacrifice, the increased employment costs may be significant. Employers should consider whether salary sacrifice remains cost-effective and whether to absorb the additional NICs cost or restructure contribution arrangements (which may require employee consent and consultation). Payroll systems will need to be updated to track contributions exceeding £2,000, and employers should consider communications to affected staff – particularly those making additional voluntary contributions who may see a reduction in the overall value of their package if the NIC cost is passed on.

County Court decision in Mendes v Slater and Gordon (UK) Limited and another

In Mendes, the court considered limitation periods for claims relating to “Beckmann rights” – the enhanced early retirement and redundancy pension benefits that can transfer under TUPE.

Dr Mendes’s employment, which began in 1994, had transferred several times under TUPE, most recently in 2012. On his redundancy in May 2017, his pension benefits reflected only his service with his last employer. His lawyers, who were instructed by Dr Mendes to claim Beckmann rights for his full service, failed to issue proceedings within six years of his redundancy. The issue was the limitation period for Dr Mendes’s lost claim against his last employer.

The court held that breach and loss arose at the date of redundancy and therefore the limitation period was six years from the date of redundancy. His lawyers have applied for permission to appeal.

Action – Mendes is the first reported decision to consider the limitation period applicable to Beckmann claims. It offers some comfort that historic TUPE transfers will not give rise to indefinite claims. However, Beckmann liabilities can be significant, and employers should ensure they are properly investigated, valued and reflected in transaction terms whenever there is a TUPE transfer.

Pensions Ombudsman determination: CAS-58611-R4B7

In September 2026, the Pensions Ombudsman upheld Mrs Y’s complaint against her employer regarding the TPS. Mrs Y was a part-time supply teacher who retired in May 2019. Her pension was overpaid by £1,039 over five months because her employer incorrectly recorded several periods of her part-time service as full-time. The errors arose from manual data processes and a payroll provider transition. Mrs Y accepted and repaid the overpayment but complained about her employer’s failure to maintain accurate records.

The employer argued that mistakes happen given the volume of data processed and that members are encouraged to check benefit statements regularly. The Ombudsman rejected this defence, stating that a member’s failure to spot an error “does not in and of itself absolve an employer or administrator from having made that mistake in the first place”. The complaint was upheld and the employer was directed to pay Mrs Y £500 for distress and inconvenience.

Action – This determination highlights the importance of accurate pension record-keeping. The Ombudsman firmly rejected the defence that errors are inevitable and that members should bear responsibility for checking their own records. Employers should review internal processes for reporting pensionable service data to Teachers’ Pensions, especially during payroll provider transitions or changes between full-time and part-time work. Failure to maintain accurate records may result in maladministration findings, compensation awards and reputational harm.