The Universities Superannuation Scheme (USS) joint expert panel (JEP) has published its definition of sustainability for the pension scheme, after a meeting was held on 8 March between the deadlocked sides.
The tripartite group – which comprises representatives from Universities UK (UUK), the University and College Union (UCU) and the USS – agreed the final wording in a shortened meeting during the early stages of the Covid-19 outbreak.
Affordability, stability, clarity, adaptability, relevance and viability were all important elements of sustainability, the JEP agreed.
“Sustainability is the concern of employers, members and potential members, and the Trustee and important for ensuring confidence in the Scheme,” the JEP statement noted.
Long term sustainability means meeting the needs of the future without compromising the present
– Joint Expert Panel
The definition means the JEP believe the scheme should be affordable for employers and members; offer clear information about contributions required; ensure it can adapt to changing circumstances; meet the needs of employers and members; safeguard benefits, and protect itself against “sudden shocks”.
However, the joint declaration added to its definition a caveat: “While it is helpful to have clarity on the issue and a common understanding, some parties may place greater importance on certain of the elements than other parties.”
The meeting was held four days before the USS had to refer itself to the Pensions Regulator for breaching the terms of its sustainability framework.
At the meeting, the tripartite group also heard from UUK about how universities have responded to the most recent JEP report (released 13 December 2019) and the 2020 valuation.
The UUK said there was strong support from universities for members to choose a flexible USS contribution rate – an option laid out in the December JEP report.
In the JEP report, under the section entitled Taking Account of the Needs of Members, the stakeholders agreed: “Stakeholders should investigate different approaches to contributions as part of a move away from one-size-fits-all approach. This could help address the high level of Scheme opt outs.”
Opt-out levels for the USS in 2018/19 stood at 15% – considerably higher than the 5% national average and “a cause of concern” for the scheme, the report said.
According to a survey commissioned by the JEP, 27% of respondents said they were opting out because contributions were too high, 19% did not expect to say in the UK long term and were concerned they would lose benefits when they moved, and 13% said they were on a fixed-term contract.
Employers said then that a flexible contribution rate would make the scheme more sustainable because fewer people would opt out.