UK universities and colleges have supported a fresh proposal for funding the Universities Superannuation Scheme (USS), as its trustee board seeks to finalise a controversial valuation process.
Universities UK (UUK), which represents employers, earlier this week published the results of a survey aimed at gathering support for one of three funding options presented by USS’ trustee board. It collected 95 responses from USS employers, covering 89% of the scheme’s active membership.
The majority of employers supported ‘option 3’ as presented by the trustees in May. This involves a combined contribution rate of 30.7% of members’ salary, effective for two years from October 2019. Employers would pay 21.1% and members would pay 9.6%.
In return for the lower contribution rate – USS initially demanded a combined contribution of 35.6% following its 2017 valuation – the trustee board has called for a temporary ban on employers exiting the scheme. Trinity College, Cambridge exited USS in June despite protests from staff and the University and College Union (UCU).
USS trustees also asked for greater ability to monitor the debt situation of sponsoring employers, and to be given equal status on secured debt. UUK’s survey found the majority of employers supported the requests, but the organisation highlighted that this was a “collective, but not unanimous, view”.
Securing support from employers for a new funding plan means the trustees are a step closer to concluding the 2018 valuation. This was a revised approach after the 2017 valuation led to a proposal to shut the defined benefit section of the £68bn (€74.4bn) scheme, triggering nationwide strike action.
UUK also said the agreement would help a joint expert panel (JEP) – set up by UUK and UCU last year – to finish its second report on USS funding and feed in to the scheme’s next scheduled valuation, which would be based on data from 31 March 2020.
“From UUK’s perspective, the priority is to give the JEP the environment in which it can best deliver its report about the future, long-term sustainability of the scheme – and the circumstances in which its recommendations can be taken into account,” UUK said.
“The stakeholder bodies created the JEP, and wish to give it the best possible chance to again be effective… Concluding the 2018 valuation in line with option 3 gives the JEP phase two report its very best chance.”
Union, regulator pose hurdles
However, the UCU has so far held firm in its belief that employees should not be made to pay for any contribution increases.
UUK, on the other hand, said the ‘option 3’ contribution level “takes employers to the brink in terms of their ability to sustainably maintain contributions to USS”. For most employers, it said, there would be “a need for strategic changes to plans and budgets”.
In addition, the UUK revealed that the Pensions Regulator – which has come under political pressure regarding its role overseeing USS – had “expressed concerns” about the employers’ preferred funding option.
The organisation said that “it seems that the trustee will have pushed the Pensions Regulator to the limit on its tolerance of risk” through selecting ‘option 3’.