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Government intervention possible if USS cannot agree reforms

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  • Government intervention possible if USS cannot agree reforms

UK - The UK government could be forced to intervene if the Universities Superannuation Scheme (USS) is not able to agree new terms regulating pension contributions.

Government intervention may be necessary if the Joint Review Group (JRG) on the future of the USS is unable to come to an agreement on 7 July.

"Government intervention - it's difficult to see how that would work, but..in theory they could," said Peter Thompson, an independent consultant to the Employers Pension Forum (EPF), in a discussion about the future of the £28bn (€33bn) pension fund on 29 June.

The JRG last month failed to agree new terms on a number of issues concerning the fund's future.

Current suggestions put forward by the EPF, which are opposed by the University and College Union (UCU), include only retaining the final salary pension for current members of the DB scheme, with new entrants awarded a career-average pension.

Raising the retirement age has also been suggested, although a normal pension age of 65 is strongly opposed by the union, who want to keep it at 60 despite scheme members living longer.

Additionally, it has been argued that a cost-sharing model needs to be introduced when there is a funding shortfall, such as the one caused during the recent equity market downturn. Currently, funding shortfalls are covered through additional employer payments.

With severe funding cuts expected to be announced to University budgets this autumn, Universities are trying to reduce cost as much as possible. 

While the UCU and EPF have both agreed to these measures, neither side can decide how high the member contributions should be.

Tony Bruce of the higher education umbrella group UniversitiesUK warned that the government was "not likely to stand by and allow such an unresolved situation to continue forever".

Speaking of a review that could see UK tuition fees rise, he said: "If the fee cap is raised, certainly the government would not want that money, any additional money spent on pensions."

"It wouldn't be politically acceptable for that money to be diverted to shore up an unreformed pension scheme," he added.

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