A trade union representing members of the Universities Superannuation Scheme (USS) is set to ballot for industrial action over proposals from university employers to amend the scheme’s structure.
The university employer representative, Universities UK (UUK), is currently consulting on four options to present to USS, a £41.6bn (€50.3bn) scheme, on how to reduce the “substantial” deficit expected to come out of the scheme’s triennial valuation results.
UUK’s preferred option is to see the complete closure of the final salary section of the scheme, shifting all final salary members to the career-average scheme, which USS set up in 2011.
This would include an upper-salary threshold of £40,000, with an additional defined contribution (DC) section for pay above this limit, while still receiving an employer contribution.
However, financial modelling on the impact of UUK’s reforms found that the impact on members’ pensions was too high for the union to accept.
Affected members would lose “tens of thousands of pounds” on their annual pension under the reforms, it said.
According to modelling, undertaken by consultancy First Actuarial on behalf of the union, some of the members stand to lose between £98,000 and £230,000 on the total value of their pension.
The union is now balloting members at 67 UK universities over boycotting examinations and coursework assessments.
“Since 2011 [when the final salary section was closed to new members], the fund’s investments have grown by £8bn, the number of members has grown by 18%, and returns on investment have outperformed both average earnings and inflation,” the UCU said.
Michael MacNeil, head of bargaining at the UCU, said the union had issues with the valuation method used at USS and argued that UUK’s plans were prompted by the expected deficit increase.
Earlier this year, USS announced annual investment returns of 7.6%.
However, the chairman warned that the scheme was set to see a dramatic increase in its deficit level once the triennial review was complete.
This was despite the fund’s reporting a £4.3bn fall in its deficit, calculated on an annual basis.
“The approach USS has adopted says the key risk to the scheme is instability over time, and this amount is determined by the valuations and scheme investment,” MacNeil said.
He said the fund should scrap its UK Gilts-plus approach to determining investment returns and swap to an internal rate of return method.
“We think this would give a more accurate picture of the scheme’s financial health and reduce volatility in the valuation result, with assets and liabilities moving more in line with one another,” he said.
“It would mean the future would look less bleak for the pension scheme than the current picture.”
He said the proposals were to the detriment of the majority of the union’s members, and that the £40,000 cap was something it would fight strongly.
“There are a number of variables with pensions, so what we need is the employers to get in a serious discussion with us to try and reach an agreed position to put to the USS board,” he said.
He added that the Union would be willing to discuss other variables such as the accrual rate and reevaluation rate.