SAUL to end final salary link over pension deficit concerns
The Superannuation Arrangements of the University of London (SAUL) is consulting with members to end its final salary defined benefit (DB) link and instead calculate benefits on a career-average salary basis.
The £2.3bn (€3.3bn) pension scheme for employers associated with the University of London – a collection of institutions – is set to reveal a £310m deficit in its 2015 financial statement, leaving it 88% funded.
A 12-person board, split evenly between sponsoring employers and union members, set about creating a deficit-reduction plan and tackle funding pressures on universities in the UK.
The proposals recommend breaking the final salary link from April 2016 and shifting all future accrual to a career-average basis.
They also freeze contribution levels for members at 6% and increase them for employers to 16% from 13%.
The proposals are now out for consultation with members after receiving backing from the Unison and Unite trade unions, employers and the trustees of the scheme.
The scheme already has close to 6,000 of its 38,000 members in a career-average scheme.
However, 8,280 active members will be affected by the expected closure next year.
Overall, it has 13,500 active members across final salary and career-average schemes, with close to 16,000 deferred.
SAUL becomes the second multi-employer university pension fund to make such changes after the UK’s largest scheme, the Universities Superannuation Scheme (USS), introduced similar reforms.
The USS benefit change was subject to a dispute between members and employers after the latter tried to change the scheme to career-average and cap the salary for DB benefits.
The £42bn scheme is set to become a hybrid career-average DB and defined contribution (DC) scheme, as members went to vote on proposals in January, after trade unions backed the final recommendations.
USS will cap DB entitlements at £55,000, with contributions taken from salaries above this being placed into a new DC scheme.
Contributions from employers will be 18%, members 8%, with employers providing 12% of the 18% for members earning more than the salary threshold in the DC section.
In the financial year to the end of March 2014, USS reported a deficit of £7.2bn as it began a triennial valuation, which is expected to reveal a substantially higher figure.