Pension savings spare English schools £460m teacher-pay bill

Ministers have dropped the demand that schools absorb part of this year’s teacher pay rise, using lower support-staff pension costs to close a £460m gap. But the promise is national, not a guarantee for every school.

The government has backed away from making schools find £460m from already stretched budgets for this year’s teacher pay rise — a retreat driven by the threat of a national strike ballot.

Education Secretary Lucy Powell has told the National Education Union that a 4.9-percentage-point fall in Local Government Pension Scheme employer contributions will cut schools’ support-staff costs. The savings will not be clawed back, she said, allowing schools to meet the teacher pay award “at a national level”.¹
That reverses July’s position, when the Department for Education said schools must fund the first 1% of each pay rise through “efficiency” savings. Teachers are due 3.5% from September 2026, followed by 3% in September 2027.²
The NEU had put the unfunded element at £460m, warning that heads would be pushed towards staff cuts. Its executive will decide on 24 September whether to proceed with a teachers’ strike ballot scheduled to open on 3 October.³
The £500m figure attached to the announcement is an estimate of the overall boost to school finances, not a newly published pot of cash distributed school by school. The existing 2026 support grant includes £522m for mainstream schools, with allocations due in October and main payments following at the end of October for local authorities and in November for academies.⁴

This is a real concession, but it is not the same as handing every school an extra cheque. Powell’s wording matters: ministers say the lower pension bill makes the pay award affordable in aggregate. Schools’ exposure to Local Government Pension Scheme costs varies with their support-staff workforce and local pension arrangements. Some may therefore feel far less relief than the national calculation suggests.

The immediate winner is the government, which may avoid disruptive industrial action without reopening the 3.5% award. The larger test remains unresolved: whether the saving prevents cuts in individual schools, or merely makes a national funding spreadsheet add up.

Pension savings spare English schools £460m teacher-pay bill

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