Committee recommends USS move to career average for new members
UK - The Joint Negotiating Committee (JNC) of the £28bn (€33bn) Universities Superannuation Scheme (USS) has agreed a package of reforms to be recommended to trustees after the chairman had to make a casting vote in favour of a move to a career average scheme.
Last month, a Joint Review Group (JRG) set up by the JNC in 2008 to review how the USS could remain sustainable failed to come to an agreement after representatives from the Employers' Pension Forum (EPF) and the University and College Union (UCU) both put forward proposals that were unacceptable to the other side. (See earlier IPE articles: Government intervention possible if USS cannot agree reforms and USS review group fails to agree pension changes)
At the meeting yesterday, the proposals from both sides were once again put forward, but neither received a majority vote of approval.
Independent chairman Sir Andrew Cubie was therefore forced to use his casting vote to break the deadlock, which he exercised in favour of the employers' proposals.
These propose a move to a career average revalued earnings (CARE) benefits structure for new entrants to the scheme.
This will be calculated on the basis of a 1/80th pension entitlement and 3/80th cash lump sum, while the contribution rate for employees of the CARE section will be 6.5%.
Additional reforms recommended to the trustees of USS included:
Once the trustee board has considered these proposals, they will be subject to a member consultation, with the planned date for implementation set for 1 April 2011.
Cubie said he had "earnestly hoped" he would not be put in the position of using his casting vote, but realised on his appointment in 2008 that the issues for the scheme would be challenging.
While he said he was disappointed the JRG had not resulted in an agreement, it was "not for lack of commitment and endeavour on both sides" to try to reach agreement.
He added: "Having taken all the relevant factors into account, I have exercised my vote in favour of the proposals put forward by the employers.
"It is my view these proposals will introduce changes that are in the best, long-term interests of the scheme as a whole.
"I am content for these proposals to go forward to the trustee board for its consideration."
Latest figures from USS reported a £17bn deficit in the scheme, and Professor Sir William Wakeham, chair of the EPF, said the changes ensured higher education institutions could continue to offer good defined benefit provision while containing cost pressure from a range of factors such as longevity.
He added: "By implementing a CARE scheme for new joiners, the USS will be able to continue to provide attractive benefits, at a cost that both employers and employees can afford."
The trustee board will consider the JNC's recommendations at its next meeting on 22 July.