The University and College Union (UCU) has developed a new set of proposals for the Universities Superannuation Scheme (USS), the UK’s largest private pension scheme by way of assets, saying they are aimed at averting industrial action on UK campuses next month “and beyond”.
Reactions from USS and UUK suggest this aim may not be met, with the latter saying the proposals appeared to ignore views previously expressed by employers.
In a letter to Judith Fish, the chair of the USS joint negotiating committee (JNC), which decides on any benefit changes and cost-sharing, UCU general secretary Jo Grady said the union’s proposals should be formally considered by the committee as soon as possible.
UCU broke its proposals down into three points. First, that Universities UK (UUK), which represents higher education employers, call on USS to issue a “moderately prudent, evidence-based valuation” of the financial health of the pension scheme as at 31 March 2022, to be issued for consultation in June at the latest.
The valuation that is at the centre of the current dispute between UCU and employers is the 2020 valuation, based on the scheme’s situation as at 31 March 2020. USS has said that a 2021 valuation would make no material difference to the required contribution rate and while the deficit would be smaller due to recent market improvements, the cost of future service would be higher.
UCU has been arguing that the 2020 valuation is flawed as it was carried out as the coronavirus pandemic hit and markets collapsed.
UCU’s second proposal is that employers agree to provide the same level of covenant support as for their own proposals to facilitate a cost-sharing of current benefits throughout the 2022/23 scheme year.
According to UCU, this should start 1 April 2022 with a 11% member/23.7% employer contribution split until 1 October, and 11.8%/25.2% thereafter.
The third proposal is for employers to agree to pay a maximum 25.2% and members a maximum of 9.8% from 1 April 2023 so as to secure current benefits, or, if not possible, “the best achievable as a result of the call on USS to issue a moderately prudent, evidence-based valuation”.
In a statement, Grady said UCU had made “serious proposals” and that employers had been offered “a route out which protects pensions and averts widespread disruption on university campuses”.
USS, UUK reactions
In her letter to Fish, Grady claimed employers’ justification for proposed benefit cuts had “now evaporated” as USS had earlier this month said its assets had grown to over £90bn (€108bn), more than £25bn higher than under the controversial valuation. As at 31 March 2021 USS’s assets stood at £82bn.
A USS spokesperson told IPE that UCU’s proposed way forward was not clear on how the funding requirements of the scheme would be met and what covenant support would be available in practice.
”We will work with UCU and with UUK to try to clarify the proposal,” the spokesperson said.
He also noted that the growth in asset values since March 2020, which were anticipated in the valuation assumptions, were only part of the picture as the cost of funding the pensions already promised to members – USS’s liabilities – and the cost of funding new pension promises had also increased since the valuation.
There has been a significant amount of volatility in these factors since the 2020 valuation date.
“The union’s proposal does not appear to be a serious attempt to reach agreement as it doesn’t reflect the views employers have expressed in consultations”
A spokesperson for UUK, on behalf of USS employers, said the association would share UCU’s proposal with employers but that the union’s suggestion for employers’ contribution – 23.7% of salary from April rising to 25.2% next year – “is far beyond the mandate employers have given UUK”.
The spokesperson also said the increase in member contributions would make the scheme unaffordable for many staff.
“The union’s proposal does not appear to be a serious attempt to reach agreement as it doesn’t reflect the views employers have expressed in consultations,” the spokesperson continued.
“Employers will also question why the proposal has arrived so late in the valuation cycle – especially since industrial action has already been taken – and will be keen to understand why it differs significantly from that previously briefed to the media by UCU, which proposed benefit reforms to tackle the scheme’s increased costs.
“We look forward to a formal discussion through the JNC about both the UCU and UUK proposals with the hope that an affordable solution can be found.”