Members will vote on proposed benefit changes to the Universities Superannuation Scheme (USS) in the coming days after a negotiated settlement between trade unions and employers.
USS – the UK’s largest pension fund, with £41.6bn (€50.3bn) in assets – has been the subject of intense negotiating between employers and unions after warnings of a “substantial” deficit in its next triennial valuation.
In response, the negotiated proposal confirms an end to final salary by March 2016, with all members seeing future accrual on a career-average salary basis.
The scheme closed final salary accrual to new members in 2011, with new joiners already accruing average benefits and accounting for one-third of the 150,000 active members.
Alongside this, the fund will also cap defined benefit (DB) entitlements at £55,000, with contributions taken from salaries above this being placed into a new defined contribution (DC) scheme.
Contributions from employer and member are at 18% and 8%, respectively, with employers providing 12% of the 18% for members earning above the salary threshold in the DC section.
The £55,000 salary cap has been a hot topic during negotiations, with employer representative Universities UK (UUK) starting negotiations at £40,000 before raising the limit twice until the agreed cap.
The new level means 75% of members in USS will be unaffected by this, compared with 39% under previous suggestions, the Universities and College Union (UCU) said.
Accrual rate for pensions is also now 1/75th, an improvement than the 1/80th previously suggested by UUK.
UCU said, given the funding environment, it believed this was the best settlement to be achieved through negotiation, with further improvements unlikely without sustained industrial action.
The union has called off any industrial action until members vote on the current proposals.
“The employers do consider this to be as far as they are prepared to go,” it said in a note to members.
“If these proposals are not accepted, the employers have stated they will revert to their preferred option of a 1/80th accrual rate.”
UCU members will be balloted on the new proposals until 26 January, with the negotiating committee of union representatives, scheme trustees and employers meeting on 29 January to discuss the outcome.
UUK said it was pleased the union had suspended industrial action while balloting took place.
“The employers have also urged the USS trustee board to make a number of changes to the technical provisions for the 2014 scheme valuation to avoid an approach that is unnecessarily prudent, to the potential detriment of the scheme’s stakeholders,” a UUK spokesman said.
Over its last financial year, USS returned 7.6% on its assets but warned a deficit as high as £12bn could result from its valuation, expected in the coming months.