No easy way out of USS strikes
Analysis: University staff across the UK are on strike over pensions for the second time in as many years, and despite detailed scrutiny of the affordability of their pensions since the first walkout in early 2018, academics still do not feel they have been listened to.
In a ballot of University and College Union members on increased contributions to the Universities Superannuation Scheme, 79 per cent backed strike action, triggering walkouts at 46 institutions beginning on Monday.
On the same day, UCU reported that 3,500 new members have joined in order to take part in the strike, which will see students miss out on at least eight days of tuition.
I’d be surprised if the members’ contribution rate didn’t increase at all. There would have to be some movement from UCU to resolve the issue, I’d have thought
With little prospect of agreement on the extent of USS’s liabilities between the trade union, employers and trustees, experts say strikes are only likely to come to an end when one side caves in and stumps up extra cash.
Stakeholders still at loggerheads on valuations
UCU has argued that cost increases for members, demanded as a result of the scheme’s 2018 valuation and the £3.6bn deficit it uncovered, are based on the same flawed actuarial practices highlighted by the Joint Expert Panel appointed to dissect the 2017 valuation.
Dr Sam Marsh, a University of Sheffield teaching fellow and one of UCU’s elected negotiators on pensions, says the decision to begin a new 2018 valuation instead of updating the 2017 valuation allowed trustees to effectively ignore the JEP’s recommendations.
“Where we ended up was with a valuation methodology that was exactly the same as the one we criticised so much,” he says.
The union argues that the strength of employer covenant means that despite short-term headwinds, the sector will remain able to support risk in the scheme.
Dr Marsh says union requests for data and analysis of how derisking will impact the scheme have not been prioritised by USS. Questioning its governance, he hopes the JEP’s delayed second report will break the deadlock.
USS, however, is adamant that more cash is needed to shore up the scheme, bolstered by ratings agency Moody’s recent decision to downgrade the University of Manchester and change its outlook from stable to negative for several other leading institutions.
A USS spokesperson says: “We recognise the difficulties in levying higher contributions but USS, along with all similar pension schemes, faces a challenging environment in which the costs of funding high-quality defined benefits have increased dramatically.
“We are in no doubt that higher contributions are required to ensure the valuable promises our employer and member representatives are making can be kept.”
Strike reception will determine outcome
Against this actuarial backdrop, either UCU or Universities UK, the body representing employers, will have to concede to the other.
According to Jeremy Harris, a partner at Fieldfisher and previously a legal adviser to USS, “the trustee company has probably gone as far as it can” in weakening its assumptions.
“A lot will depend on how the strike action goes,” Mr Harris says. “I’d be surprised if the members’ contribution rate didn’t increase at all. There would have to be some movement from UCU to resolve the issue, I’d have thought.”
However, when pushed on its “no detriment” stance, the union maintains that not only is the valuation basis flawed, but universities could afford to cover the increase in member contributions, up to 9.6 per cent from 8 per cent since September.
Dr Marsh points to the employer contribution in the Teachers’ Pension Scheme, into which newer universities pay higher contributions than would be required of USS sponsors.
“The post-92 part of the sector is already paying employer contributions at a higher rate,” he says.
“There’s little reason why they couldn’t, and shouldn’t, take the contributions and bring the member rate back down to 8 per cent.”
Academics union questions regulator’s oversight of USS
Academics have expressed disquiet over the role of the Pensions Regulator in the governance in one of the largest occupational pension schemes in the UK.
UUK, meanwhile, has pointed to the bare facts of the increases it has already accepted – an additional £250m a year by raising its payments to 21.1 per cent of salary – and has also stressed that this temporary situation will pave the way for a more transparent funding agreement once the second JEP report is published.
“This position has been formed following extensive engagement and consultation with the 340 employers in the scheme, many of which cannot sustain higher contributions,” says a UUK spokesperson.
“Some are smaller employers outside the sector, including charities doing life-changing work.”
The question of which party is likely to bend first may come down to how much pressure UCU can bring to bear on employers, according to Ranjit Dhindsa, Fieldfisher’s head of employment, pensions, immigration and compliance.
She says the impact of the strike will be determined by the turnout of UCU members, the length of the action, the disruption caused to students, and whether those students seek redress from the universities to whom they pay their fees.
“There were some complaints from students before,” Ms Dhindsa says.
“As ever there are some claimant law firms out there that are looking at this as a potential market.”
UCU has said a second wave of strikes could follow this eight-day stretch, and Ms Dhindsa says this could be an important factor.
“If they were to strike in the exam season… I think that would worry the employers a lot more,” she says.