A consultation with employers in the Universities Superannuation Scheme launched today as Universities UK looks to modify its proposals for the 2020 valuation.
If agreed, the modification would mean the deferral of the 2.5% cap on inflationary increases to pension benefits, a key aspect of employers’ proposal. The deferral of the cap would remain in place for three years until April 2025.
UUK said the plan would increase the contribution rate by 0.3%, but “at no additional cost to scheme members”. Employers would pay 0.2% and the remaining 0.1% met through “a modest extension to the recovery plan”.
The consultation with USS employers warned the 2.5% cap on inflationary increases was the proposal “that has drawn the greatest comment and concern”. Around 4,500 employees contributed to the USS consultation.
Employers were told that implementing the cap from 2025, however, helps to secure “the necessary reductions in the value of the future benefit package – enabling member and employer contributions to remain at their current level”.
Currently, benefits are granted inflationary increases up to 5%, measured on the Consumer Prices Index (CPI). The current cap means that accrued pension benefits would also gain half of any inflationary increase above 5% to a maximum of 10%. In the last 12 months, CPI rose from 0.6% to 5.4% – and the Bank of England expects it to peak at 6% by April 2022. UUK told employers: “It appears a very substantial concern of those being consulted that this change is being introduced especially at a time when inflation, as measured by CPI, is at relatively high levels.”
The plan is designed to avert strike action that is set to affect 44 universities in the coming weeks.
The University and College Union described the UUK consultation proposals as “deeply disappointing”.
It said the “temporary suspension of a cap” would “devastate the retirement benefits of thousands” when lifted.
“Rather than rushing to consult on these insufficient proposals, UUK should be formally considering those put forward by UCU,” said UCU general secretary Jo Grady. She described the union’s plan as “the only serious, affordable compromise” and called on vice-chancellors to “make their views known as a matter of urgency”.
UUK has said employers could not afford the plans for USS pensions put forward by UCU, which rest on “unsubstantiated” claims and “hypothetical” outcomes.