Recommendation 2

Rising pension costs are putting significant pressure on college finances. Staff costs, including pension contributions, typically account for around two-thirds of colleges’ running costs, and have been rising in recent years. Employer contributions to the Teachers’ Pension Scheme rose by over 40% in 2019. The government provided colleges with extra funding to cover this increase in 2019/20 and 2020/21, but colleges are worried about the affordability of contributions in future years. In addition, the Local Government Pension Scheme, which college support staff may belong to, has had a deficit in recent years and colleges have had to make payments to help cover the deficit, on top of their standard contributions. Recommendation: The Department should write to us within three months, setting out what it has done to assess pension cost pressures on colleges, and how it has taken account of these in its funding decisions.