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Five things we learned from universities’ pensions accounting disclosures in 2025

by John Ingoe

It’s been a period of good news for university pensions: Teachers’ Pension Scheme (TPS) costs are set to fall from next year, the USS preliminary valuation results show a sizeable surplus and the aggregate funding position of self-administered trust (SAT) schemes sponsored by universities improved materially over the year to 31 July 2025. But beneath the headline improvement there are stark gaps between  institutions with a SAT defined benefit (DB) scheme. Some universities may soon be considering how best to use a pension surplus, while others could face higher contribution demands under the Pensions Regulator’s new funding regime.  I should note that for trust-based schemes, it is the trustees who are the legal owners of the pension scheme assets. They must act “in line with the pension scheme trust deed and rules, in the best interests of the pension scheme members [and] impartially, prudently, responsibly and honestly.”  As such, decisions on both use of surplus and making up shortfalls do not rest solely in the hands of the universities involved.

We reviewed the 2024/25 pension disclosures of 29 universities that sponsor their own SAT DB scheme for some groups of staff. We looked at how their funding positions have changed, how much universities are contributing, what their schemes cost to run and how these arrangements compare with the wider DB universe and USS. Five findings stood out.

Finding 1: Things are looking up

Balance sheet positions improved and contributions paid by universities fell over the year. Driven by a combination of higher bond yields, strong returns from growth assets, and employer contributions, all but three universities saw an improvement in their balance sheet position over 2024/25.  All else being equal, those same factors should also mean that funding positions, which drive contribution requirements, have improved in recent years. We saw some evidence of this over 2024/25, as aggregate contributions fell to around £190m from £220m in 2023/24.

However, there’s a big caveat – the Pensions Regulator’s new funding code is now in place, and so all else is not equal.  The new funding code may lead to the trustees of SATs pushing for stronger funding targets and less time being given to making good any shortfall, both of which could lead to an increase in contribution requirements. Exactly how contributions change will, as always, depend on each institution’s particular set of circumstances.

Finding 2: The aggregate position hides material differences between institutions

Pension schemes have legal obligations to balance assets and liabilities in the long term. Schemes are frequently reviewed to check the  – “the extent to which the employer and any suitable contingent assets can support the scheme, now and in the future, and the risks to this support being available when needed.” If normal employer contributions are not currently sufficient they may be obliged to pay extra deficit contributions to restore the balance.

Universities and trustees carry out valuations of their pension schemes for a variety of reasons. Every year, universities carry out a valuation to determine the pension scheme asset or liability to recognise on their balance sheet, and the cost of the scheme to show in their accounts for the year.  For universities reporting under the UK accounting standard, the requirements for this valuation are set out in Section 28 of FRS102.

Separately, every three years (or more frequently if needed), trustees will assess whether they have sufficient assets to meet their liabilities (ie the pensions that are promised to members).  In carrying out this valuation, and placing a present value on future pension payments, assumptions are made around future investment returns, inflation and mortality (among other things).  If the valuation shows a shortfall (ie if the assets are not sufficient to cover the liabilities), the sponsor may be obliged to pay deficit contributions to ‘balance the books’.  The requirements for funding valuations are governed  by the Pensions Regulator.

The aggregate position across the 29 universities in our survey is healthy, with an FRS102 surplus of £620m at 31 July 2025.  But funding levels vary significantly and different universities are having to consider very different questions. For a handful of better funded schemes there is a surplus and attention will turn to how the surplus could be used. Could it subsidise the cost of new benefit build-up or improve member benefits, could it improve defined-contribution (DC ) benefits, or could it be returned to the university? For the five best funded arrangements the total surplus on a Low Dependency basis could be in excess of £600m. (Low Dependency is the minimum measure that could be used to determine whether a surplus could be released to a sponsor, ie the university).  Potentially, that £600m could all be used for one or more of the aims set out above.

Others are still facing a shortfall and are continuing to pay extra deficit contributions. The new funding code could mean that scheme trustees look to strengthen funding targets and remove any shortfall more quickly. For the five least well-funded schemes, annual contributions by universities might increase by 50% to meet the new DB funding code’s “Fast Track” parameters. 

Finding 3: HE funding positions lag behind the wider UK DB universe

The Pensions Regulator (TPR) estimates that, for all the DB schemes it regulates, around 80% of schemes are fully funded on a Low Dependency basis and 60% on a buy-out basis. However at 31 July 2025 we estimate that the equivalent figures are 25% and 15% in higher education. On average, DB schemes in the HE sector are not as well funded as their counterparts elsewhere. 

University accounts do not give definitive information, but an educated guess is that:

  • As part of a funding valuation, trustees consider the ‘covenant’ – “the extent to which the employer and any suitable contingent assets can support the scheme, now and in the future, and the risks to this support being available when needed.” – provided by the sponsoring employer.  Historically, employers in higher education have been viewed as having a strong covenant (or certainly, a stronger covenant than many UK DB scheme sponsors). Having a stronger covenant means that trustees and sponsors are more able to adopt less prudent funding targets, and to allow any funding shortfall to be made good over a longer period. 
  • Most of the schemes in our study have now hedged a significant level of interest rate and inflation risk, but the timing of any change in investment strategy matters.  A scheme that hedged these risks before the “mini-budget” in September 2022 will not have benefitted as much from the subsequent bond yield rises (as other schemes, including USS, have). 
  • Many of the DB schemes considered remain open (three in four still have benefits building up).  That means that there is naturally less focus on the “end-game” of the scheme, which may in turn mean less stringent funding targets are in place.  For example, an open scheme is unlikely to be targeting the very prudent level of funding needed for a buy-out transaction (ie securing benefits with an insurer – an option that is increasingly targeted by closed private sector schemes). 
  • The SAT DB schemes do not represent the most significant pension cost or risk for HE institutions. For some institutions, the level of contributions required for USS is also likely to have constrained their ability to address funding shortfalls in their SAT schemes more quickly.

For many institutions it may well remain the case that they are not as prudently funded as the average DB scheme – and that’s absolutely fine. However, for some universities, scheme trustees may become more uncomfortable with shortfalls and/or weaker funding targets. The general improvement in funding levels across the DB universe, combined with the Pensions Regulator’s new funding code, may mean we see scheme trustees pushing for higher contributions to strengthen their scheme’s funding position more quickly.

Finding 4: Running a DB pension scheme is an expensive business

Running a DB pension scheme is not cheap, but our survey suggests that the costs of running schemes in the HE sector may be particularly high. We might expect the core running costs for schemes to be around 0.33% of assets for smaller schemes and as low as 0.15% of assets for larger schemes. Based on the information in our study, the average running cost for those that disclosed it in their 2024/25 pension note was almost 0.6% of assets, with 1 in 8 spending more than 1% of assets on running their scheme over 2024/25.

There will undoubtedly be reasons for this “overspend”. Benchmarking of costs is likely to be dominated by closed schemes, and it is more complex (and therefore more expensive) to run an open DB scheme. Universities may also have provided additional work beyond the “core service” requirements of a pension scheme. But even taking those factors into account, there may still be scope to improve efficiency and reduce costs. Pension running costs may not receive the same scrutiny as other university expenses, especially if they are met directly by the scheme, but these costs are still ultimately borne by the employer, and so should face the same scrutiny as other costs.

Finding 5: The importance of these arrangements is overshadowed by USS

Across the universities in the survey, less than 10% of total pension expenditure was in respect of benefits building up in a SAT DB scheme. This partly reflects the fact that DB is not the sole method of pension provision for non-academic staff in the sector – many institutions offer a DC option alongside, or in place of, their DB arrangements. But most pension expenditure is on academic staff who, for the institutions in our survey, are mainly members of USS. As a result, the contributions to USS were materially higher than contributions to other arrangements.

In total, the 29 universities considered recognise around £6bn of pension liabilities on their balance sheet.  The USS preliminary funding valuation (for all universities in the scheme) puts USS pension liabilities at over £60bn. There are more employers participating in USS than the 29 universities considered in our study, so we cannot conclude that each university has ten times as much exposure to USS as to its own SAT DB scheme. At a sector level, however, it does illustrate the relative scale of USS – and, given its strong current funding position, the significance of that improvement for the financial outlook of the sector as a whole.

What should universities be thinking about?

From a pension perspective, things have greatly improved in recent years, with an expectation that the position at 31 July 2026 is likely to be even better. Continuing increases in bond yields have improved accounting and funding positions, while also reducing the cost of providing future benefit accrual. There is also good news from the other schemes in the sector (USS, TPS and the Local Government Pension Scheme).  Coming at a time of significant uncertainty for the sector, falling pension costs are certainly welcome.  Decisions made on the ongoing USS valuation will have a material impact on employment costs for the sector.

But it’s not all good news for the sector.  For the 29 universities we have considered it is very much a story of the haves and have-nots. The Pension Schemes Act 2026 is expected to make it much easier for employers to access surplus, although employers and trustees will first need to consider the appropriate balance between using surplus for the benefit of members and returning it to the employer. Those institutions still facing a funding shortfall will need to be aware of the potential implications of the new funding code, and whether that will drive up contribution rates.

In both cases, monitoring and managing running costs will be important. For employers making good a deficit, every pound spent on expenses is a pound not being used to close that gap. For those considering a surplus release, keeping running costs under control will help maximise the surplus available and make a release more achievable.

John Ingoe is an Associate Partner and Head of Employer Actuarial Services at First Actuarial, a Gallagher Company. He has over 19 years’ experience working with employers such as higher education institutions and other not‑for‑profit organisations. He helps them meet strategic pension challenges including defined benefit scheme funding, multi‑employer pension arrangements and complex pension change projects. www.firstactuarial.co.uk. john.ingoe@firstactuarial.co.uk..


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Restoring academic values: a key for university effectiveness

by John Kenny

This blog post is based on research into the effectiveness of higher education policy, published in Policy Reviews in Higher Education. The article, ‘Effectiveness in higher education: What lessons can be learned after 40 years of neoliberal reform?’, takes a systemic perspective to consider a range of roles needed for HE to function effectively in the more accountable HE environment of today (Kenny, 2025).

It focusses on three key stakeholder groups arguably most pertinent to effectiveness: government policy makers, university corporate leaders and the academic profession, with a particular focus on the academic role, as this is typically overlooked in much of the research into higher education policy, yet we argue critical to the effectiveness of the system.

A systemic approach to HE policy assumes that reform in educational systems is complex and unpredictable. It also accepts that different stakeholders may experience change differently, there needs to be an understanding of the different roles played within the system and how they interact. Of particular concern in this article is how the academic role interacts with other stakeholders, especially the government regulators and university corporate leaders.

For over 40 years, a top-down ‘command and control’ approach to change has been adopted in HE. Typically, when this mind-set drives change, the inherent complexities of systemic change are disregarded, and it is assumed the outcomes of a reform can be pre-determined. It largely ignores the relationships, values and experiences of other stakeholder groups, which systems theory suggests is not appropriate for effective educational reform (Checkland, 2012; OECD, 2017).

By contrast, this article points to research into effective organisations that identified four ‘culture groups’ as present in any organisation: the Academic, the Corporate, the Bureaucratic and the Entrepreneurial. Each of these has a unique values perspective from which it approaches the decision-making process. These ‘competing values’ determine the organisational values, but with the values of the dominant group tending to prevail. The research linked organisational effectiveness (or performance) to a “strong culture” defined as one in which the practices and processes are in alignment with the espoused values position of the organisation (Smart & St John, 1996; Quinn & Rohrbaugh, 1981).

For academic institutions such as universities, HE policy specifically identifies both Corporate and Academic governance as the two most important (Gerber, 2010; MCU, 2020; TEQSA, 2019a; 2019b; 2023). It follows that, in an effective organisation, a “strong culture” would be based on both the corporate and academic values having a more equal influence over decision-making.

Many of the current problems have arisen because, under the neoliberal reform agenda, with government policymakers aligned with corporate values, a corporate culture has dominated for the last 40 years. This has led to a situation in universities where corporate leadership dominates and academic leadership has been diminished (Gerber, 2010; Magney, 2006; Yeatman & Costea (eds), 2018).

The intention of this work is not to demonise any culture group nor argue for a return to a ‘Golden Age’ where academics tended to dominate. It proposes that, in the more accountable HE environment of today, from a systemic perspective the unique nature and purposes of universities as trusted organisation means each of these roles is important. It argues that across the system the government, corporate leaders and Academia, each play an important, but distinct role in ensuring the system, and universities, function effectively. For the HE system and universities to be effective, as opposed to more efficient, we need better understanding of these distinctions and more clarity about the accountabilities that should apply to each group (Bovens, 2007; Kearns, 1998).

This work pays particular attention to understanding the academic role. It argues that, with the domination of a corporate mind-set, which values control, compliance, competitiveness and productivity, academics are seen as “mere employees” (Giroux, 2002; Harman 2003), whose autonomy and academic freedom need to be curtailed (Hanlon, 1999).

This paper argues this situation has been exacerbated by the failure of the academic profession to define their role in this more accountable HE environment. The paper points to research that aims to fill this gap by re-defining academic professionalism in the more accountable HE environment, but in a way that does not sacrifice its essential ethical and autonomous underpinnings.

It further argues these unique characteristics of academic work, which have compelling implications for the overall quality of university education, have come under sustained attack from the rise of political populism (Hiller et al, 2025), increased disinformation and misinformation on social media, and the growing use of Artificial Intelligence (AI).

An extensive review of national and international literature identified four ‘foundational principles’ (Kenny et al, 2025) which present a definition of the academic role involving a holistic combination of academic leadership, shared professional values, and independence in scholarship, underpinned by a “special” employment relationship. The historical, political, legislative, educational and cultural context of any particular HE system, however, requires these ‘foundational principles’ to be translated into a set of ‘enabling principles’ to suit that HE context (Freidson, 1999; Kenny & Cirkony, 2022).

To test this empirically, a set of ‘enabling principles’ were developed for the Australian HE context as a case study. Kenny et al (2024) described how, in the three phases of this action research study already completed, a set of ‘enabling principles’ has been developed and incorporated into a Professional Ethical Framework for Australian Academics (The Framework).

This case study aims to re-define the nature of academic work to re-emphasise its contribution to the effectiveness of HE, both in Australia and around the globe. The Framework represents our current re-definition of the academic profession in the more accountable Australian HE context. However, the universality of the foundational principles suggests this approach might be replicable by researchers in other HE contexts (Kenny et al, 2025).

This work addresses the compelling question of the sustainability of the academic profession by:

  1. Providing greater alignment across the HE system between the broader social purpose of universities and the important role that academics play.
  2. Unifying individual academics as professional scholars through a set of common professional values and a justification for their professional autonomy and academic freedom.
  3. Contributing to the sustainability of the academic profession by enabling individual academics to better navigate the competing tensions within their institutions as they build their professional identity based-on transparent professional standards, adequate resourcing and accountability mechanisms that will minimise exploitative practices currently evident in the system (AUA, 2024).
  4. Providing a common language that enables non-academic stakeholders, including governments, university management, industry, students, etc, to better understand the unique role academics play in ensuring the HE system and universities are effective in meeting their obligations to Society.
  5. Providing foundational principles that can be adapted to other HE contexts and facilitate the creation of a global academic community of practice through which the profession can enhance is voice in shaping the future of HE around the globe.

This work should help to restore a balance of power between the academic and corporate leadership in the governance of universities by facilitating more purposefully designed governance structures and accountability mechanisms that enable academic staff to influence HE policy formation, decision-making and resource allocation, which is especially important against a backdrop of growing political and economic challenges to universities.

Feedback from our national and international academic colleagues is encouraged. Those wishing to find out more are directed to the website of the Australian Association of University Professors (AAUP) at https://professoriate.org, where more information can be found about this research and how you might participate in the further development of The Framework,which has been made available for consultation with and feedback from a broader national and international academic audience.

John Kenny has extensive experience as a teacher and teacher educator and leadership in academic professional issues. His growing concern over the long-standing systemic issues in higher education, loss of independence for universities and loss of prestige for the academic profession led him to take a more systemic perspective and initiate this research looking into the role of academia in the effectiveness of higher education.

The author may also be contacted directly by email (John.Kenny@utas.edu.au).

Vicky Gunn


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Notes from North of the Tweed: Valuing our values?

By Vicky Gunn

In a recent publication, Mariana Mazzucato1. pushes the reader to engage with a key dilemma related to modern day capitalist economics. ‘Value extraction’ often occurs after a government has valued work upfront through state investment and accountability regimes. The original investment was a result of the collective possibilities afforded by a mature taxation system and an understanding that accountability can drive positive social and economic outcomes (as well as perverse ones). The value that is extracted is then distributed to those already with both financial and social capital rather than redistributed back into the systems which produced the initial work via support from the state in the first place. This means that the social contract between the State and its workers (at all levels) effectively has the State pump prime activity, only to watch the fruits of these labours be inequitably shared.

I find this to be a useful, powerful and troubling argument when considering the current relationship between State funded activity and the governance of UK HE. As a recipient of multiple grants from bodies such as the Higher Education Academy (now AdvanceHE) and the Quality Assurance Agency (now a co-regulatory body in a landscape dominated by the Office for Students), I have observed a similar pattern of activity. What this means is that after a period of state funding (ie taxpayers’ money), these agencies are forced through a change in funding models to assess the value of their pre-existing assets. The change in funding models is normally a result of a political shift in how they are valued by the various governments that established and maintained them. The pre-existing assets are research and policy outputs and activities undertaken in good faith for the purposes of open source communication to ensure the widest possible dissemination and discussion, with an attendant build up in expertise. After valuing these assets, necessary rebranding may obscure the value of this state-funded work behind impenetrable websites in which multiple prior outputs (tangible assets) are pulled into one pdf.  Simultaneously, the agencies offer intangible assets based on relationships and expertise networks back to membership subscribers through gateways – paywalls. This looks like the unregulated conversion of a value network established through the collaboration of state and higher education into a revenue generating system, restricting access to those able to pay.2. If so, it represents a form of value extraction which is limited in how and where it redistributes what was once a part of the common weal.

Scottish HE has attempted to avoid this aspect of changes in the regulatory framework in two ways:

  • Firstly, by maintaining its Quality Enhancement Framework (QEF) in a recognisable form.3. Thus: the state continues to oversee the funding of domiciled Scottish student places; the Scottish Funding Council remains an arms-length funding and policy agency which commissions the relevant quality assurance agency; Universities Scotland continues as a lobbying ‘influencer’ that mediates the worst excesses of external interventions; and the pesky Office for Students is held back at the border, whilst we all trundle away trying to second guess what role metrics will play in the quality assurance of an enhancement-led sector over the next five to ten years. Strategic cooperation and value co-creation remain core principles. And all of this with Brexit uncertainty.
  • Secondly, by refocusing the discussion around higher educational enhancement in the light of a skills agenda predicated not on unfettered economic growth, but on inclusive and sustainable economic growth.4.

Two recent outputs from this context demonstrate the value of this approach: The Creative Disciplines Collaborative Cluster’s Toolkit for Measuring Impact and the Intangibles Collaborative Cluster’s recent publication.5. Both of these projects were valued for the opportunity they provided of collaborative problem solving across Scottish HEIs. Their outputs recognise it is now more important than ever to demonstrate the impact of what we do. Technological advances in rapid, annualised data generation is driving demands to assess the  value of our higher education. The prospect of this demand requiring disciplinary engagement means academics leading their subjects (not just Heads of Quality, DVCs Student Experience, VPs Learning and Teaching) need to be more aware of frameworks of accountability than before. Underneath the production of these outputs has remained a belief in the value of cooperation over the values of competition.

However, none of this means that those of us trying to maintain a narrative of higher education as the widest possible state good can rest on our laurels. If we are to seize this particular moment there are some crucial tensions to problematise and, where appropriate, resolve. We need formal discussion around the following:

  • What is to be valued through State influence in Scottish HE? How does the ‘what is to be valued’ question relate to the values and value of this education socially, culturally and economically?
  • How are these values and value to be valued through the accountability framework for higher education in Scotland?
  • What will the disruptions created by a new regulatory framework in England (based on a particular understanding of value and values) mean for how Scottish institutions continue to engage with the QEF, when they will probably also have to respond to a framework that would like to see itself as UK-wide?
  • How can we protect years of enhancement work from asset stripping and value extraction? How can we continue with an enhancement framework with social, cultural, and economic benefits for Scotland and its wider relationship with the world, at the same time as supporting reinvestment into the enhancement of Scotland’s higher education?
  • There is a push to revalue ‘success’ as simple economic outcomes, away from inter-relational outcomes that capture intangible but nonetheless critical aspects of that education – social coherence, wellbeing, cultural confidence and vitality, collective expertise, innovation, responsible prosperity. That path of value extraction may result in more not less inequality: how can we mitigate it?
  • How can all of this be done without merely retreating to the local? Bruno Latour has noted how locality is a cultural player in the current political inability to engage effectively with the planetary issue of the day: climate crisis.6. He notes the sense of security in the local’s boundaries and a perception across Europe that we somehow abandoned the local in the push to be global. The local is important. Yet, he clarifies, climate regime change means withdrawal into the local in terms of value and values – without interaction across political boundaries at a global level – is tantamount to wilful recklessness. How we can enable higher education to secure the local and the global simultaneously is surely the big question with which we are grappling. How can Scotland’s HE leaders engage to ensure the value and values we embody through our accountability regime do not get mired in local growth agendas unable to measure the impact of that growth within a global ecology?

Sitting within a creative arts small specialist institution, these questions seem both overwhelmingly large (how can a minnow lead such a conversation, surely only a BIG university can do this?) and absolutely essential. In the creative arts our students are, in their own frames of reference, already challenging us on the questions of value, values, environmental sustainability and inequality through their artistry, designerly ethics, and architectural wisdoms. I am, however, yet to hear such a recognisable conversation occurring coherently across the various players (political, policy, institutional) in the wider sector, except in activities related to the localities of cultural policy, the creative economy, and HEI community engagement.7.

Perhaps it is time for sector leaders, social, cultural, and economic policy-makers, and student representatives to work together to identify the parameters of these questions and how we can move forward to resolve them responsibly.

SRHE member Professor Vicky Gunn is Head of Learning and Teaching at Glasgow School of Art.

Notes

  1. Mazzucato, M (2018) The Value of Everything: Making and Taking in the Global Economy,  Penguin, p xv
  2. Allee, V (2008) ‘Value network analysis and value conversion of tangible and intangible assets’, Journal of Intellectual Capital, 9 (1): 5-25.
  3. This 2016 description of the sector’s regulatory framework of enhancement remains broadly the same:  https://wonkhe.com/blogs/analysis-devolved-yet-not-independent-tef-and-teaching-accountability-in-scotland/
  4. See the Scottish Funding Council’s latest strategic framework: http://www.sfc.ac.uk/about-sfc/strategic-framework/strategic-framework.aspx
  5. Enhancement Themes outputs: Creative Disciplines Collaborative Cluster: https://www.enhancementthemes.ac.uk/current-enhancement-theme/defining-and-capturing-evidence/the-creative-disciplines
    Intangibles Collaborative Cluster: https://www.enhancementthemes.ac.uk/current-enhancement-theme/defining-and-capturing-evidence/the-intangibles-beyond-the-metrics
  • Latour, B (2018) Down to Earth: Politics in the New Climatic Regime Polity Press, p 26
  • Gilmore, A and Comunian, R (2016) ‘Beyond the campus: Higher education, cultural policy and the creative economy’, International Journal of Cultural Policy, 22: 1-9
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Embracing plurality and difference in higher education – necessary but not sufficient

By Rob Cuthbert – Editor, SRHE News

The SRHE Annual Research Conference in December 2014 invites us to reflect on Inspiring future generations: embracing plurality and difference in higher education: ‘Within the HE research community we have the capacity, the history, the knowledge and the expertise to inform and shape the transformation of the higher education sector globally into an innovative, multi-faceted system; one with new and different sources of funding, with diverse modes of participation and one more responsive to the changing needs and expectations of people, institutions and societies.’ Quite right: inspiration is a benefit we expect of Conference every year. We have it in ourselves to be the best, but there are always temptations to be otherwise, with the lure of funds and reputation sometimes suggesting unethical short cuts. SRHE Vice-President Roger Brown, who in his latest book bemoaned the kind of marketisation where it appears that everything is for sale, has recently warned that ‘The pursuit of status will be the death of the university as we know it.’

Reports of ethical lapses are usually tales of individual transgression and recent European research on unethical behaviour suggests that too many academics admit to some of the behaviours of which they disapprove. But even this pales by comparison to an academic scandal at one of the US’s leading universities, the University of North Carolina at Chapel Hill. Continue reading →