The teacher pay rise in England is now expected to be fully funded at national level, after the government confirmed that schools can retain savings generated by lower employer pension contribution costs rather than having to absorb part of the pay award from existing budgets.

Teachers are set to receive a 3.5% pay increase from September 2026, followed by a further 3% from September 2027.

The government had previously expected schools to meet part of the cost through their own budgets, prompting strong opposition from the National Education Union (NEU).

The latest funding change removes the estimated £460 million shortfall highlighted by the NEU.

The union estimates that allowing schools to retain the pension-related savings is worth approximately £500 million, substantially changing the affordability of the 2026/27 pay award.

The announcement could also reduce the immediate risk of teacher strike action, although the NEU has not yet formally cancelled its proposed national ballot.

Is the Teacher Pay Rise Fully Funded in 2026?

Yes. The government now says schools in England should be able to cover the cost of the 3.5% teacher pay award for 2026/27 at national level without having to make the previously expected level of savings from existing education budgets.

The change follows a revaluation of the Local Government Pension Scheme (LGPS).

Education Secretary Lucy Powell told the NEU that recent pension scheme revaluations are expected to result in a 4.9 percentage-point reduction in employer contribution rates.

This lowers schools’ employment costs for support staff.

The government has confirmed that these savings will not be clawed back.

Schools can therefore retain the savings, providing additional budget capacity that can help meet the teacher pay award.

This is an important distinction. It does not simply mean that every school will receive a new ring-fenced £500 million teacher-pay grant.

Instead, schools are expected to benefit from lower pension-related employment costs, with those savings remaining available within school budgets.

What Is the Teacher Pay Rise for 2026 and 2027?

The current multi-year teacher pay package provides:

Pay Year	Teacher Pay Increase
September 2026	3.5%
September 2027	3%
Headline increase across two years	6.5%

The government accepted the School Teachers’ Review Body recommendations for the two pay years in July 2026.

For most teachers and school leaders, the 3.5% uplift applies to pay points and allowances from September 2026.

There is a separate 5% increase for the minimum point of the unqualified teacher pay range outside London under the proposed 2026 arrangements.

The final statutory process was still continuing in September 2026, so schools should distinguish between the government’s accepted pay recommendation and completion of the formal School Teachers’ Pay and Conditions Document process.

How Much Will Teachers Earn After the 2026 Pay Rise?

The 3.5% award increases teacher salaries across the main, upper and leadership pay ranges.

For teachers outside London, indicative main pay range figures include:

Pay Point	2025/26	2026/27
M1	£32,916	£34,069
M2	£34,823	£36,042
M3	£37,101	£38,400
M4	£39,556	£40,941
M5	£42,057	£43,529
M6	£45,352	£46,940

London teachers receive higher rates because separate London Fringe, Outer London and Inner London pay ranges apply.

Government teacher recruitment information says the average teacher salary is expected to exceed £52,800 from September 2026 and rise above £54,400 from September 2027.

Academies have greater freedom over their individual pay arrangements, although many choose to follow national teacher pay scales.

Why Was the Teacher Pay Rise Previously Not Considered Fully Funded?

When the two-year pay package was announced on 1 July 2026, the government committed additional funding but also expected schools to find part of the cost themselves.

The Department for Education originally said schools would be expected to find the first 1% of each pay award through efficiencies and better value from their existing budgets.

The NEU calculated that schools still faced a funding gap equivalent to around 1.1% of the 2026/27 pay award, worth approximately £460 million.

That became one of the central issues in the dispute.

School leaders and unions argued that schools already facing pressures from staffing, energy, SEND provision and other costs could be forced to reduce spending elsewhere to meet teacher salaries.

The NEU therefore made full funding of the pay award a major demand.

For context, school support staff including many teaching assistants are covered by different pay arrangements. Those following negotiations can also read about the teaching assistant pay rise in 2026.

What Changed With School Pension Contributions?

The breakthrough came from changes to pension costs rather than an alteration to the teacher pay percentage itself.

The Local Government Pension Scheme covers many people working in support roles within schools.

Following scheme revaluations, employer contribution rates are expected to fall by 4.9 percentage points.

That means schools should spend less on pension contributions for affected support staff.

The government has said it will not remove those savings from school budgets.

Lucy Powell told the NEU that this material change in schools’ costs meant the government was confident that schools could afford the teacher award “at a national level”.

The change is particularly relevant because local-government-linked pension and staffing costs can have a substantial effect on education budgets.

Wider developments affecting council employees and school support workers are covered in the 2026/27 local government pay rise.

How Much Extra Funding Does This Give Schools?

The NEU estimates that closing the previous affordability gap effectively protects around £460 million in school budgets.

Independent analysis reported alongside the announcement puts the wider benefit at approximately £500 million for schools in England.

That is equivalent to a permanent funding increase of just under 1%, according to Institute for Fiscal Studies research fellow Luke Sibieta.

Schools are estimated to be around £1.6 billion better off from next year than had been expected earlier in the summer, once wider funding changes are included.

However, describing the entire amount simply as “£500 million of new government funding” could be misleading.

A significant part of the improvement comes from schools being permitted to retain savings created by lower employer pension contribution costs.

For headteachers and school business managers, the practical result is nevertheless important: less of the existing education budget should need to be redirected towards covering the teacher pay award.

What Has the NEU Said About the Fully Funded Teacher Pay Rise?

NEU general secretary Daniel Kebede described the development as a significant step.

He said:

“Finally, we have a government that accepts the reality that any teacher pay award must be fully funded.”

Kebede said closing what the union had calculated as a £460 million hole in school budgets would prevent schools from having to make education cuts simply to cover the salary award.

The NEU has presented the change as the result of sustained pressure from its members and negotiations with the Department for Education.

That is the union’s interpretation of how the change was secured.

The government has framed the development around a change in schools’ affordability following the pension revaluation rather than a change to the underlying teacher pay award.

Could the Fully Funded Pay Rise Stop Teacher Strikes?

It could significantly reduce the immediate dispute over funding, but teacher strike action has not formally been ruled out yet.

Before the summer break, the NEU held a snap poll of teacher members in maintained schools in England.

The union reported that:

• 97% of participating members considered it unacceptable for schools to have to cover the outstanding funding gap.
• 89% said they were prepared to take strike action to secure full funding.

A formal national ballot had been planned for October 2026.

Following the new funding position, Powell asked the NEU to reconsider the planned ballot and move away from industrial action.

The NEU executive is expected to consider its response on 24 September 2026.

Therefore, it would be premature to say that the strike threat has officially ended.

The funding announcement addresses one of the union’s central demands, but the NEU has also raised wider issues involving workload, accountability, teacher wellbeing and longer-term real-terms pay.

Why Does Full Funding Matter for School Budgets?

Teacher salaries represent one of the largest costs faced by schools.

A national pay rise can therefore create a substantial financial pressure if the additional salary bill is not matched by sufficient funding or savings elsewhere.

Without the latest change, schools could have faced decisions such as:

• Reducing staffing levels.
• Delaying recruitment.
• Cutting classroom resources.
• Reducing extracurricular activities.
• Leaving vacancies unfilled.
• Reducing spending on maintenance or equipment.
• Using financial reserves to cover recurring salary costs.

The significance of the latest announcement is that schools should no longer have to find the previously identified £460 million gap from their existing budgets at national level.

Individual schools can still have very different financial circumstances, however. Pupil numbers, staffing structures, SEND requirements, regional salaries and existing deficits can all influence whether an individual school remains under financial pressure.

Does Fully Funding the Pay Rise Mean Every School Gets More Cash?

Not necessarily.

“Fully funded” does not mean every school receives an identical additional payment covering its exact teacher wage bill.

The government’s position is based on national affordability.

Savings from reduced pension contribution costs will vary according to individual schools’ staffing structures and support-staff expenditure.

One school with a large number of LGPS-covered support employees may experience a different saving from another school with a different workforce.

Therefore, the national funding position can improve while individual schools still experience different budget outcomes.

This distinction is important when interpreting claims that the teacher pay award has been fully funded.

What Happens to Teacher Pay in September 2027?

The second part of the multi-year settlement provides another 3% teacher pay increase from September 2027.

This forms part of the government’s two-year package accepted following recommendations from the School Teachers’ Review Body.

Teacher pension costs are also due to change from April 2027.

Government guidance confirms that the employer contribution rate for the Teachers’ Pension Scheme is scheduled to fall from 28.6% to 17.6% from April 2027.

Funding associated with the previous higher employer contribution costs will consequently be adjusted.

Schools will therefore need to consider several interacting changes when preparing 2027/28 budgets rather than looking only at the headline 3% salary increase.

When Will the 2026 Teacher Pay Rise Be Finalised?

The government accepted the School Teachers’ Review Body recommendation in July, with the proposed 3.5% increase applying from 1 September 2026.

However, the statutory consultation and implementation process has continued beyond that date.

The consultation on the draft School Teachers’ Pay and Conditions Document is scheduled to close on 23 September 2026.

The Local Government Association says the final updated document is expected around 6 November 2026, following the required legislative process.

Teachers may therefore see payroll implementation after the nominal 1 September effective date, depending on the employer and completion of the process.

Where applicable, salary changes can be backdated to the effective date.

What Does the Fully Funded Teacher Pay Rise Mean Going Forward?

The immediate significance is that the 3.5% teacher pay rise for 2026/27 should no longer leave schools nationally responsible for the previously identified £460 million funding shortfall.

The government says reduced pension costs provide enough additional budget capacity to make the award affordable, while the NEU regards the announcement as confirmation that the teacher pay package has become fully funded.

For teachers, the headline pay figures themselves have not changed: the package remains 3.5% from September 2026 and another 3% from September 2027.

What has changed is how schools are expected to afford the first year’s award.

The next major development will be the NEU’s decision on its proposed industrial-action ballot, alongside completion of the statutory teacher pay process.

For schools, attention will also turn towards whether the improved funding position is sufficient to address wider pressures involving staffing, recruitment, retention, SEND provision and support staff costs.

FAQs About the Fully Funded Teacher Pay Rise

Is the teacher pay rise fully funded in England?

The government now says the 2026/27 teacher pay award is affordable at national level because schools will retain savings generated by lower Local Government Pension Scheme employer contributions.

The NEU describes the change as securing full funding for the award.

How much is the teacher pay rise in September 2026?

Most teacher pay points and allowances in England are set to increase by 3.5% from September 2026. A further 3% increase is planned from September 2027.

How much will a newly qualified teacher earn in 2026?

The minimum starting salary for qualified teachers outside London is expected to be above £34,000, with the M1 advisory point at £34,069 for 2026/27. London rates are higher.

Is the government giving schools an extra £500 million?

Approximately £500 million has been cited as the effective improvement to school finances, but it should not simply be described as a new £500 million teacher-pay grant.

Much of the change results from schools retaining savings generated by lower support-staff pension contribution costs.

Will teachers still strike in 2026?

No final decision has been made. The NEU had planned a formal ballot over pay funding, but its executive is due to reconsider the position following the government’s latest announcement.

What was the teacher pay funding shortfall?

The NEU calculated that schools would previously have needed to find approximately £460 million, equivalent to around 1.1% of the pay settlement, from their own budgets.

Does the teacher pay rise apply across the whole UK?

No. The arrangements discussed here concern teachers in England. Teacher pay and education funding arrangements are devolved in Scotland, Wales and Northern Ireland.

Will teachers get another pay rise in 2027?

Yes, under the current multi-year package, a further 3% increase is planned from September 2027.