The chief executive of Universities UK (UUK) has written to the general secretary of the University and College Union (UCU), calling on the union to share the details of its alternative plan for the Universities Superannuation Scheme.
The letter from UUK chief Alistair Jarvis is in response to a letter from UCU general secretary Jo Grady, dated 8 November, outlining the results of a union ballot of 68 university branches on the plans for the future of USS pensions.
In that letter, Grady said the tally was “an impressive set of results“, that she intended to hold strikes this term and re-ballot branches where turnout was within 10% of the 50% threshold required for a legal strike ballot. She called on UUK to ditch its plans for pensions and join her in calling for a new valuation of the scheme.
Mr Jarvis said he was “extremely disappointed” at her chosen course of action – and counselled: “We cannot act in denial of the problem – no change just isn’t an option.”
While employers appreciate that nobody wants to see a reduction in their future pension benefits, it is clear that the alternative is worse
– Alistair Jarvis, Universities UK
In his letter he urges the general secretary to publish the union plan for the pension scheme, as he has done repeatedly since September this year. The union released some details to the media then but never published its plan in full.
Grady alleges her UUK opponents “spiked” the union proposals by refusing to financially underwrite them, rendering them unable to be formally considered by the pension trustee. UUK says it could not give unlimited financial backing without the union providing more details.
UUK has proposed plans for the scheme, which would maintain contribution rates for staff and employers at current levels, but cut the accrual rate, which reflects the value of pension earned each year, and water down the defined benefit (DB) element of the scheme. UUK says its plans are necessary to maintain the long-term health of USS, remain compliant with the Pensions Regulator and cover the cost of the 2020 valuation. It warns that if the sides cannot agree upon changes, the Trustee will pass on the higher contribution rates it calculates are required to employers and employees in April 2022. For employers, contributions would increase to 11% of salaries; for employees, 23.7%: increases unaffordable to both parties, UUK says.
The limited aspects of the union plan released to the media demonstrate movement away from the “no-detriment” position UCU previously took on pensions. Under the UCU plan, accrual rates would be reduced, and so too would the defined benefits threshold. But the UCU plan includes protection against inflation. It also proposes allowing university staff to contribute between zero and four per cent of salaries towards their pensions if they cannot afford the monthly payments, while employer contributions would continue. Sources within the union admit their plans are unlikely to garner significant support from members. Grady’s latest letter to Jarvis makes no mention of this plan.
Instead, the UCU negotiating position appears to have shifted away from lobbying for a union alternative plan for the 2020 valuation. It wants to restart the entire valuation process, to demonstrate its underlying belief: that the scheme can continue to afford members’ benefits.
The union argues the 2020 valuation was flawed because it occurred during the beginning of the pandemic when financial markets were in freefall; it now wants UUK to publicly call for the USS Trustee to conduct a new valuation and pay the interim higher costs. But four successive valuations, or interim valuations, in the past three years have all reached similar conclusions. The Pensions Regulator sets strict rules, which the USS Trustee has followed using standard actuarial methodologies. At the request of UUK and UCU, USS Trustee produced a briefing outlining the likely outcome of a 2021 valuation in July. Its conclusion: “We would not expect the outcome of a 2021 valuation to be materially different”.
Jarvis addressed this request in his letter. “It would be helpful if you were able to share any professional advice you have taken which indicates that a 2021 valuation could credibly lead to a better outcome, which the USS Trustee might find acceptable and which it might consider would warrant a new valuation (and which would also be compliant with pensions regulations),” he wrote to Grady.
“While employers appreciate that nobody wants to see a reduction in their future pension benefits, it is clear that the alternative is worse. That is why employers have had to propose changes to future benefits, whilst also pledging additional backing for the scheme to lower cost and make accrued rights even more secure,” Jarvis added.
The union and the organisation representing 340 USS employers, including universities, HE bodies, charities and research institutes, are, then, at loggerheads, unable to agree on the scale of the problem – let alone the course to a solution.