The government's announcement of a new multi-year teacher pay settlement has provided schools and trusts with something that has been in short supply in recent years: certainty.
- Teachers will receive a 3.5% increase in September 2026
- Teachers will receive a 3% increase in September 2027
For school finance leaders, the significance is not just the award itself, but the fact that it covers two years. Multi-year settlements allow trusts and schools to move beyond short-term budget planning and incorporate known staffing costs into medium-term financial forecasts with greater confidence.
Provisional Pay Tables Now Available in SBS Financial Planner
In response to the announcement, the SBS development team has already published provisional teacher pay scale tables within SBS Financial Planner.
With the Budget Forecast Return (BFR) deadline now extended to September, finance teams have additional time to incorporate confirmed pay increases into their plans and submissions. The availability of updated pay assumptions within Financial Planner means schools and trusts can quickly assess the impact of the award on future budgets and financial forecasts.
Kelly Crawford commented:
"Because the BFR deadline has been put back to September, it gives schools and trusts time to incorporate known pay increases into their planning. For those using financial planning software such as SBS Financial Planner, this becomes a simple update rather than a complex modelling exercise."
Funding: Welcome Clarity, but Not Fully Funded
While the government has announced £1.8 billion of additional funding over two years to support teacher and support staff pay awards, schools will still be expected to find the first 1% of each pay award from existing budgets. The Department for Education has confirmed in an accompanying statement that this includes an additional £700 million in 2026/27, rising to approximately £1.1 billion in 2027/28, with further details and calculator tools expected shortly.
This has prompted concern from education unions. The National Education Union (NEU) argues that asking schools to contribute towards the award means the settlement is not fully funded and could create further pressure on already stretched budgets. The union estimates schools will collectively need to find around £460 million to cover their share of teacher and support staff pay increases.
Sector View: A Positive Outcome for Budget Planning
David Bond, CFO at Lion Academy Trust, welcomed the announcement:
"The confirmation of the teachers' pay award, together with the associated funding to cover the costs above 1%, provides much-needed certainty as we all finalise academy budgets for the 2026/27 financial year. Critically, the two-year nature of the award ensures that, for the first time in a number of years, we can budget with greater confidence beyond just the year immediately ahead.
We had budgeted for the cost of pay awards to be greater than 1% to our schools, needing to be prudent in budget setting, and had undertaken sensitivity analysis of the implications and mitigations were the cost to schools to be higher than our budget setting.
So this is good news, of schools being expected to fund only the first 1% and our plans will now adapt, enabling us to accelerate our support to pupils.
I look forward to seeing the detail of the additional grant funding covering the costs beyond 1%, but overall I believe this is positive news. Our teachers, and all teachers working in state education, work incredibly hard every single day. This award helps recognise that commitment, while the accompanying funding means school leaders can implement the pay award without having to make cuts to the critical services that support pupils and communities."
The Remaining Unknowns
While teacher pay has now been confirmed, several significant planning assumptions remain unresolved.
Support Staff Pay
The 2026/27 support staff pay award remains unsettled. Employers have made a full and final offer of 3.3%, backdated to 1 April 2026, but all three recognised unions, UNISON, GMB and Unite, have rejected the proposal. Industrial action ballots are now being considered or launched, meaning schools and trusts still face uncertainty around support staff costs.
Pension Contributions
There has also been significant discussion around future pension costs.
The government has now confirmed that employer contributions to the Teachers' Pension Scheme (TPS) will reduce from April 2027 following the latest valuation. However, schools and trusts should not expect this to generate a budget windfall. Alongside the reduction in contribution rates, the Department for Education has confirmed that funding allocations will also be reduced at a national level, making the change broadly cost-neutral for the sector as a whole.
The ministerial statement accompanying the teacher pay award confirmed that schools and colleges are expected to see employer contribution costs fall by around £3 billion in 2027/28, with funding reduced by the same amount. For mainstream schools, the adjustment will be incorporated into the 2027/28 National Funding Formula, with additional arrangements for academies covering the period between April and August 2027. Further details, including funding methodologies and calculator tools, are expected shortly.
At the same time, many schools have already seen reductions in Local Government Pension Scheme (LGPS) contribution rates from April 2026 as a result of the scheme's improved funding position.
The position remains fluid, and finance leaders will be watching closely for further guidance on how both TPS funding adjustments and LGPS contribution changes will affect individual schools and trusts.
What This Means for CFOs and SBMs
For now, the key message is clear: the biggest budget variable for 2026/27 has been confirmed.
Schools and trusts can begin updating their forecasts with confidence, using the latest provisional tables available in SBS Financial Planner. While support staff pay and future pension arrangements continue to evolve, the confirmation of a two-year teacher pay settlement provides a much stronger foundation for strategic financial planning than the sector has experienced for some time.
SBS Financial Planner users can access the provisional teacher pay tables now and begin modelling the impact across their budgets and longer-term forecasts.
Meet our SBS expert
Kelly Crawford
Finance Service Lead
Get sector Insights delivered straight to your inbox.
Subscribe to to the SBS Blog and never miss an update.