Public sector union Unison has protested against Bangor University’s plans to raise pension contributions, but despite the demurral, changes will be going ahead this month.
Bangor is not the only university that is modifying its self-administered pension scheme. The University of Edinburgh is one of several institutions that have also made amendments to reduce their deficits while being more in line with Universities Superannuation Scheme changes.
Pensions officer Robin Glyn explained that all members joining the circa £130m Bangor University Pension and Assurance Scheme from 2010 automatically earned career average revalued earnings rather than final salary benefits.
Pricing staff out of the pension scheme will be counterproductive because to remain viable, the pension scheme needs as many members of the scheme as possible
Geoff Edkins, Unison
Existing members could previously choose to pay around 7.85 per cent contributions for Care or 9.25 per cent to accrue benefits on a final salary basis.
However, Glyn said that from January 2017, “there’s no further accrual of final salary benefits”, and “all members now pay the same contribution rate” of 9.25 per cent.
Bangor scheme replicates USS changes
Mike Davies, director of finance at Bangor University, explained that results of the 2014 valuation of the Universities Superannuation Scheme, which is the predominant scheme in use at the university, led to increased contributions and reduced benefits being agreed.
“In order to maintain parity of treatment of staff... a similar package of changes was proposed for our local scheme,” said Davies.
He said that “one key element of the USS change, disconnecting all accrued benefits from future salary linkage, was not possible under the BUPAS scheme rules, so an alternative package was offered”.
The university launched a consultation, which ended in September 2016, but Davies said formal responses to the consultation from members were limited. He added that the impact of the member protests was considered, but “no clear case for an alternative solution” was evident.
Union is concerned about lower earners
In September, university support staff gathered to protest against this contribution hike. Unison voiced its concerns that the higher contributions would lead to lower earners leaving the scheme and urged the university to wait until the next scheduled valuation in 2017.
Despite the plea in the autumn for a deferral of any changes, the university “felt it had no alternative” but to go ahead with the changes proposed “due to the financial imperatives the university and sector generally, continue to face”, Davies said.
Geoff Edkins, organiser at Unison in Wales, said “members are fearful” that paying 9.25 per cent into a Care scheme “will price them out of having a pension at all”, particularly with regard to "many of our low paid part-time members".
He said this would leave them in poverty when they retire, "bearing in mind they have been receiving less-than-inflation pay rises for years”.
Edkins explained that Unison recognises that "money is tight, but pricing staff out of the pension scheme will be counterproductive because to remain viable, the pension scheme needs as many members of the scheme as possible".
“We will be consulting our members on what action they wish to take,” he added.
Alex Waite, partner at consultancy LCP, said: “University departments across the UK are coming under pressure financially due to increasing longevity of members in their pension schemes.”
He added that this has been compounded by low long-term bond yields, “which means it is inevitable that members' contributions will need to increase, and the pension promise being accumulated each year will need to be reduced”.
Edinburgh University proposes raft of changes to plug scheme deficit
The University of Edinburgh has proposed a number of changes to its defined benefit pension fund to make the scheme more affordable and sustainable, as its deficit has risen by a quarter.
What trustees should do
Robert West, partner at law firm Baker & McKenzie, said when a scheme undergoes these kinds of changes the role of the trustee is to safeguard benefits that have already been accrued.
Trustees must ensure that members understand the effect of the changes that are taking place, and that there are no unintended consequences of those changes, he added.
“The important thing is to have very clear communication with the members, and also to explain the reasoning for making the changes,” West said.
