The UK Department for Education (DfE) says a 3.5% teacher pay award taking effect in September 2026 will be funded through a 4.9 percentage point reduction in Local Government Pension Scheme (LGPS) employer contribution rates, prompting accusations from the NASUWT union that the move amounts to recycled, not new, money for schools.

Education Secretary Lucy Powell announced the award in September, telling the National Education Union (NEU) in a letter that "recent revaluations to the Local Government Pension Scheme (LGPS) will see a reduction in employer contribution rates and deliver significant savings on schools' pay bill for support staff." A DfE blog published on 16 September 2026 set out how the School Teachers' Review Body's recommended 3.5% rise, followed by a further 3% from September 2027, would be financed.

What did the DfE change in its public messaging?

Since Powell's announcement, the DfE has edited the blog post, removing the statement that the reduction in pension costs "will not be clawed back" and deleting a table that had detailed how the rise would be funded. Asked whether the Treasury had agreed extra funding for teacher pay rises, the DfE told the iPaper that the pay award "remains the same" and that what has shifted is "the affordability position following the recent valuation of the LGPS." The department described the pension saving as "a substantial improvement in schools' overall financial position for this year."

Why are unions disputing the funding claim?

NASUWT general secretary Matt Wrack argued that the pension-driven savings already sat inside school budgets, so heads and trust leaders must now find extra money to cover the teacher pay rise. He has called for "urgent discussions" with the department to reopen negotiations on the 2027/28 award, proposed at 3%.

Wrack said: "Addressing pay and workload must be part of a wider commitment to a long-term substantial increase to education funding, in order to ensure every child can receive a world-class education." The union has asked the DfE to republish the original funding table and has urged Powell to "explain to the profession which services she expects schools to cut."

NASUWT also warned that the impact of the LGPS revaluation will not be uniform across all schools, raising the prospect of differential pay bills depending on local authority pension fund performance.

What is the industrial action picture?

The NEU opened a strike ballot in May, threatening autumn industrial action over pay. The union paused that ballot on 24 September following Powell's funding announcement. Whether the dispute reignites now that the funding mechanism is in question will depend on the DfE's response to NASUWT's demand for fresh talks and on the Treasury's next spending review settlement for education.

What does this mean for HR in schools?

For HR directors in multi-academy trusts, local authorities and maintained schools, the funding dispute translates into a workforce planning problem. The 3.5% uplift for September 2026 and the proposed 3% for September 2027 need to be reconciled against budgets that may or may not capture the full LGPS saving, depending on the timing of each fund's next actuarial valuation.

Schools that had held vacancies or deferred recruitment to balance the books may now face pressure to release those savings to meet the pay bill. HR teams will need to model the cost of the award under both "new money" and "rebadged" funding scenarios, and brief governing bodies on the trade-offs between staffing levels, support staff pay and the headline teacher award.

What happens next?

The DfE's response to NASUWT's request to reopen 2027/28 talks will set the benchmark for whether the pension revaluation can credibly underwrite two consecutive years of above-inflation teacher pay awards without fresh Treasury support. School employers should expect further clarification, or further dispute, before the next academic year's budget cycle closes.