The Universities Superannuation Scheme has said “there is no operational impediment” to implementing plans put forward by the University and College Union for the 2020 valuation.
The union wants employers and employees to pay higher contribution rates to the pension scheme for a year while the USS conducts a brand-new valuation of its assets. It is the union’s hope that a 2022 valuation would find that the long-term financial outlook of the scheme has improved, negating the need for cuts to pension benefits.
With the USS notice, UCU’s general secretary Jo Grady has claimed employers now have a “golden opportunity” to resolve the valuation and avoid strikes.
Although the chief executive of Universities UK (UUK), Alistair Jarvis, suggested the UCU proposals “would do little to resolve the dispute“, he said he would consult the 340 USS employers if the Trustee deemed them viable.
But the “no operational impediment” assessment from USS is not a conclusion.
A requisite of that assessment is “that employers are willing to provide the necessary covenant support and that UCU and UUK representatives on the Joint Negotiating Committee agree to commit to member and employer contributions escalating, over time, to 13.9% and 29.1% respectively”.
Employers have repeatedly stated that the current rate of contributions is at the limits of what they can afford. A rise to rates – even a short-term one – set out by USS is unlikely to draw the support of vice-chancellors and the bosses of hundreds of smaller research institutes and charities.
UCU members know that when employers say they can’t afford pension contributions, what they are really saying is that they don’t value their staff
– Jo Grady, UCU
A spokesperson for USS employers confirmed a formal consultation is now underway.
The consultation asks employers to confirm they will provide a multi-billion-pound package of covenant support, pay an additional £200m annually from April, then an extra £330m annually from October, and – ultimately – £700m more per annum until April 2024. The collective cost of USS to the 340 employers is around £2bn.
“Paying more would have a significant and detrimental impact on the sector’s collective ability to deliver high-quality education and research,” employers said.
Employers added: “By proposing such high costs for employers and members, the union is asking employers to put pensions before other university priorities including the student experience, pay, and the jobs of its members.”
UCU claim that consultation with USS members at the start of the year found widespread support for higher pension contributions for a year to maintain benefits. USS has not publicly released the consultation findings.
That a new valuation would uncover more favourable prospects for USS is by no means definite. Employers and employees may pay higher rates for a better outcome that does not materialise.
The UCU general secretary says she has seen figures from the USS Trustee in an email to the union, dated 18 January, that show the value of USS assets had increased by £25bn to £92bn by the end of 2021. Confirming the £92bn figure to University Business, a spokesperson for the pension firm said it only represents “one part of the picture”, noting that costs have also increased last year. This suggests a new valuation might not reach a materially different conclusion.
With strikes called off, UCU says it wants to progress “scheme design and governance arrangements” to help keep pension costs low in the long term.
Said Grady: “UCU’s proposals reflect the views of a majority scheme members who responded to the USS consultation and will prevent devastating cuts whilst providing room for a new evidence-based valuation.
“The excessive prudence of the 2020 valuation has already shown itself to be wrong and any changes to the scheme need to be based on a more realistic view.
“UCU members know that when employers say they can’t afford pension contributions, what they are really saying is that they don’t value their staff.
“The ball remains firmly in the court of Universities UK and vice-chancellors. They must do the right thing.”