The pension surpluses found in the private sector are as great (if not greater) in the Council’s funded Local Government Pension Scheme. This is a blog that explores the mis-understandings that followed an announcement from the Government that teacher’s pay increases would be fully funded.

In the run-up to the pay decision, the NEU announced it would launch a formal ballot for industrial action unless the government made a fully-funded, above-inflation pay offer.

The NEU teaching union hailed this week’s teacher pay announcement as a “significant” victory that will ensure this year’s rise is fully funded and plug a £460 million black hole in school budgets. Teachers will get 3.5% which is slightly the UK average pay increase of 3.6%. At first this does not look like a pay award above the normal.

But we should note that an increase in pay for Teachers will also mean an increase in the wage in retirement offered to Teachers from their pension scheme. That’s because it is based on how much Teachers are paid. So it could be argued that the pay increased is supplemented from the deferred pay increase from the Teacher’s pension.

With the pay and deferred pay improvement, I  see this increase as above average. The award was made earlier in the year when average earnings were lower so it was a victory for the NEU and now a proper victory.

The teacher pay award for 2026-27 will be funded “at a national level” from savings to employer contributions for support staff pensions, the government has claimed. This means that the teachers will not be in hock to Government for a part of the payment (they will not have to make cuts, to meet the pay rise cost).

The money that they’d had to find under the original offer is now fully funded by the Government out of money they would have paid into LGPS. Support staff in schools are in the LGPS.

The support staff do not get access to the unfunded Teachers Pension but to the over-funded LGPS which is heading towards a contribution holiday (remember them) for its sponsors. The sponsors are the employers that include the Government.

The GMB says the government’s announcement is “misleading” and that they are being treated “like idiots”. The Times finds a way to cast the unions as greedy and divided.

So what is really going on?

There is an important precedent at stake here. The Government – one way or another – is paying most of LGPS’ costs. Whether it is directly (as with the Teacher support staff’s pension contributions) or indirectly through Council pension contributions the scope for savings in the short term is enormous.

The Local Government Pension Scheme in England and Wales has just published its healthiest set of valuation results in a generation. The LGPS funding level, assets measured against the pensions promised, has climbed from 107% to 122% in three years, and the aggregate surplus has more than trebled to £72.9 billion. Employer contribution rates are falling from April 2026 as a result. If you’re one of the scheme’s 7.2 million members, the obvious questions follow: does a surplus mean a bigger pension?

The answer is emphatically “no” but neither is the surety of your LGPS pension (if you are in it). That’s because the pension payments are guaranteed by Councils. You’d have to see Councils going bust for pensions not to be paid in full to pensioners.

So with the best will to the GMB, while the chances of the surplus being shared with pensioners, the chances of pensioners getting a lower pension are both close to zero. The GMB may be wrong here , I can see why they are angry for DB pensions in general, most of which are in surplus. The unions argue that this money is owing to ordinary scheme members.

Private sector employers using pension surpluses to pay bills they’ve incurred is good news  for shareholders and for the executive of the employer. It doesn’t do much for ordinary workers who make up GMB (or other unions) membership.

Is this really a national agreement? Is it good news for all teachers?

An analysis of 2025 pension schemes from the LGPS advisory board found the average total employer contribution rate fell from 21.5 per cent of payroll costs to 16.5 per cent, following the latest valuation.

This is an average reduction of 4.9 percentage points – but the change at individual fund level ranged from 0 to a fall of 10.2 percentage points.

The board also says there was “significant variation” between funds and it expected “even more variation at the individual employer level”, because contributions are set for individual employers.

It remains to be seen how much subsidy from the LGPS pension scheme will happen when the council has been told by the actuary they should not take a partial contribution holiday.

Maybe this isn’t good news for all schools and their budgets.

The Government isn’t alone in eyeing up the LGPS surplus!