Union claims to have ‘route out’ of pension dispute

Although the University and College Union says it has proof that a new valuation of the USS scheme is needed – a spokesperson for the scheme appeared to refute this latest claim

The general secretary of the University and College Union, Jo Grady, has announced what she described as “serious proposals” for the Universities Superannuation Scheme (USS) that could offer a “route out” of the current negotiating stalemate. 

The proposals, however, received short shrift from Universities UK, which represents employers in negotiations with UCU. It said the plan “does not appear to be a serious attempt to reach agreement”. 

The pension firm appeared to refute some parts of the UCU case put forward today. A USS spokesperson suggested crucial figures quoted by the union “are one part of the picture” and questioned “how the funding requirements of the scheme would be met” under the new UCU proposal. 

UCU branches at 44 of the 68 university members of the beleaguered pension scheme could take strike action in the coming term over plans put forward by UUK to resolve the 2020 valuation, which concluded that the USS had a deficit of between £14–£18bn. 

The union has yet to decide when – or if – strikes will go ahead in 2022, but the 37 UCU branches took strike action over the UUK pension plan in December 2021

UCU has issued three proposals, urging the chair of the Joint Negotiation Committee – who arbitrates discussions between UCU and UUK – to table them “as soon as possible”. 

First proposal: a new valuation

UCU has called on UUK to press the USS to issue a “moderately prudent, evidence-based valuation” of the scheme, assessing its underlying financial health as of 31 March 2022. The union is banking on a new valuation finding that the deficit is under control and concluding that the contribution hikes – which precipitated the UUK-proposed pension cuts – are no longer necessary. 

The 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.

The most recent valuation took place just as the impact of the Covid-19 pandemic spread across global markets – UCU said throughout 2021 that the process should be rerun. USS refute that the timing of the 2020 valuation made any difference to the outcome. At the request of UCU in summer 2021, the USS Trustee produced a briefing outlining the likely outcome of a 2021 valuation. Its conclusion: “We would not expect the outcome of a 2021 valuation to be materially different”. 

Four successive valuations, or interim valuations, since 2018 have all reached similar conclusions: that the combined value of assets and contributions from employers and members is not large enough to pay the likely future pension bill.

University Business confirmed the £92bn figure with the USS Trustee today. A spokesperson for the pension firm said it only represents “one part of the picture”, noting that costs have also increased last year. This latest USS comment suggests a new 2022 valuation might not reach a materially different conclusion. 

The second proposal: short-term higher contributions 

UUK acts on behalf of 340 USS employers. The list of member employers includes 68 universities, several higher education bodies, research bodies, like the Institute of Cancer Research, and many small charities. 

UCU wants them to agree to pay higher contributions for a year while the long-term future of the scheme is considered with a new valuation. At the moment, employers contribute the equivalent of 21.4% of staff salaries to the pension scheme and individual members the equivalent of 9.8%. For employers, these figures would rise to 23.7%, then 25.2%, under the new union plan – and to 11%, then 11.8% for individual members.

“For a short time, employers and scheme members would see a relatively small uplift to their contributions, which would protect benefits until a new, moderately prudent and evidence-based valuation could be implemented,” the letter from Jo Grady says.  

A consultation with scheme members recently closed. UCU believes that scheme members “want to see their benefits protected and by a significant margin would support increases in contributions to help achieve that”. It wants USS to release the consultation responses to help prove this. 

The third proposal: cap on contributions 

Post-April 2023, the union says employers should agree to pay a maximum of 25.2% and members a maximum of 9.8%. 

The response from UUK

A spokesperson for UUK said that the increased contributions would have a “damaging impact on teaching, research, the student experience, and jobs”. It also cautioned that even a short-term increase to member contributions “will make the scheme unaffordable for many staff, and undoubtedly increase the already high drop-out rate among the lower-paid”. 

“The union’s proposal does not appear to be a serious attempt to reach agreement as it doesn’t reflect the views employers have expressed in consultations,” the UUK spokesperson continued. 

“Employers will also question why the proposal has arrived so late in the valuation cycle – especially since industrial action has already been taken – and will be keen to understand why it differs significantly from that previously briefed to the media by UCU, which proposed benefit reforms to tackle the scheme’s increased costs.”

Earlier in the valuation cycle, UUK chief executive Alastair Jarvis urged Jo Grady to publish in full an alternative long-term plan for USS pensions. To date, she has yet to do so.

The response from USS

A spokesperson for USS said: “UCU’s proposed way forward is not clear on how the funding requirements of the scheme would be met and what covenant support would be available in practice. We will work with UCU and with UUK to try to clarify the proposal.” 

Confirming the £92bn asset value figure quoted in the UCU letter, the USS spokesperson continued: “Asset values have grown since 31 March 2020 (as anticipated in the valuation assumptions), but these are one part of the picture. The cost of funding the pensions already promised to members (our liabilities) and the cost of funding new pension promises (the ‘future service cost’) have also increased since the valuation. There has been a significant amount of volatility in these factors since the 2020 valuation date.”

Read more: UUK and UCU trade repudiations on eve of December 2021 strikes

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