Universities propose closing DB scheme of largest UK pension fund
UK universities have proposed closing the defined benefit (DB) section of the Universities Superannuation Scheme (USS), the country’s largest pension fund.
Future benefits should be provided by the defined contribution (DC) section of the £60bn scheme, Universities UK (UUK) announced today after tabling the proposal at a joint negotiating committee.
“This proposal would tackle the scheme’s financial deficit and rising future costs whilst ensuring that it continues to offer attractive pensions benefits to members,” it said.
USS reported an official deficit of around £5bn following its 2017 actuarial valuation, but other valuations have put the shortfall as high as £12bn-£17bn. It said the cost of funding future pension benefits had increased by 35% and that contribution increases of six to seven percentage points could be required.
The union representing university staff has warned that “chaos” would ensue if the row over the scheme were not resolved.
Responding to UUK’s proposals, the University and College Union (UCU) said they “were a bolt from the blue” and that it would ballot members for industrial action. The strike ballot will open on 27 November.
UUK said the threat of industrial action was “premature and disappointing as there is an agreed series of imminent meetings between UUK and UCU to discuss USS pension benefit reform”.
“Employers have been requesting discussions with UCU on reforms to USS benefits for the last six months to deal with the significant funding challenges facing USS,” the organisation added.
UCU general secretary Sally Hunt said the employers’ proposal was “categorically the worst proposal I have received from universities on any issue in 20 years of representing university staff”.
The union pointed to analysis commissioned by USS that it claimed showed that most universities have the ability to pay extra in order to safeguard existing benefits.
Alistair Jarvis, chief executive of UUK, countered this, saying: “Most universities can’t afford to pay more into pensions without diverting money from other central areas, such as teaching or research, reducing their positive impact.
“Increasing contributions could damage the high standards that students, research funders and others rightly expect. It could even undermine the sustainability of some institutions.”
A spokesman for USS said: “Very low prospective returns across all asset classes have created very challenging circumstances for all pension providers. USS’s primary duty is to ensure pensions already promised to its members are secure, and that pensions offered in future can be met with a high degree of confidence. It has been impartial and objective in its analysis and is now working with employers and union representatives as they determine future benefits. Benefits members have earned to date are secure and protected in law.”
Frank Field, Labour politician and chair of the Work and Pensions Select Committee, has urged all parties to safeguard university finances to avoid pension costs being passed on to current and future students.