Employers hit back at benefit cut claims as USS strike action looms

UCU is balloting its members on Monday over strike action, following a deal struck between UUK and the USS trustee that employers said will stave off “ruinous” contribution rate hikes following the controversial 2020 valuation.

Negotiations lasted several months, culminating in UUK’s alternative reform proposal, which included a 20-year moratorium on scheme exits and pledges of greater covenant support.

The USS trustee accepted these proposals, which came at the price of a major governance review and a pledge to explore alternative scheme designs aimed at making USS sustainable in the long term.

While the employers’ proposals were sufficient to ward off the threat of contribution rate increases ranging from 30.7 per cent to 56.2 per cent of payroll, UCU was left unhappy with a solution that it said amounts to a significant cut to member benefits, while having its own alternative proposals ignored.

Pensions Expert has reported previously on the results of a ‘benefits modeller’ produced by UCU that claims to show affected members suffering benefits cuts of as much as 35 per cent, a figure now disputed by UUK, citing figures produced by a USS ‘contributions calculator’ published in September.

The employers’ group last week called for UCU to return to the negotiating table, a proposal given short shrift by the union’s general secretary, Jo Grady, who said: “All the press releases in the world cannot hide the fact that UUK are cutting USS members’ guaranteed pensions by 35 per cent. Instead of wasting time on ridiculous PR moves like this to undermine our upcoming strike ballot, employers should withdraw their cuts and agree to a new valuation of the scheme.”

UUK has hit back at Grady’s claims, arguing that UCU never formally proposed its own alternative solution to the 2020 valuation gridlock, and that its claims of a 35 per cent benefits cut are misleading.

A UUK spokesperson said: “We are disappointed UCU is pressing ahead with an industrial action ballot over USS pensions. The proposed reforms secure USS’s status as one of the most attractive pension schemes in the country, and eliminates the need for massive contribution rises that would severely reduce pay and force employers to make cutbacks in other budgets.

“Discussions over the valuation are still ongoing. Employers met with UCU representatives [on October 12], and further meetings are planned for the coming weeks. However, it is hard to see how UCU’s demands can be reconciled without an alternative solution, which we have consistently asked them for and are willing to consult employers on.”

UCU has previously claimed that it did put forward an alternative proposal, but that this was not properly considered by employers. The union has argued that its proposals were not given the same level of support that employers were prepared to offer for their own solution.

Under its preferred solution, employers would pay contributions of 24.9 per cent, up 3.8 per cent from the existing rate, while members would pay 8.1 per cent, 1.5 per cent less than they do currently.

Accrual would be reduced from 1/75th to 1/80th, while the salary threshold up to which DB benefits accrue would be lowered to £40,000.

Additionally, all benefits would receive the same protection against inflation as they do currently, via a system of trigger contributions payable by employers if inflation exceeds 2.5 per cent, and members would be able to choose to pay even lower contributions — zero per cent or 4 per cent — while receiving the same level of contributions from their employer and continuing to build up a guaranteed pension at a proportionately lower accrual rate, the union said.

Members who spend less than two years — but more than three months — in the USS would be entitled to the same benefits as everyone else. This is in contrast to employer proposals under which an average scheme member would see benefits cut by as much as 35 per cent, UCU argued.

“After a difficult 18 months, students do not deserve any further disruption. It is unclear why UCU thinks it’s appropriate for students to suffer due to the scheme’s increased costs and the regulatory constraints under which pensions operate in the UK,” the UUK spokesperson continued.

They argued that UCU’s claim of a 35 per cent benefits cut is “misleading” and “may lead staff to make life-changing decisions and opt out of USS, missing out on “an employer contribution of 21.4 per cent towards their retirement”. 

“In fact, last week the USS trustee published modelling which shows that for university staff on a range of salary levels, the annual pension reduction would be between 10 and 18 per cent; not 35 per cent, which UCU has calculated without taking into account the defined contributions element of the scheme,” the spokesperson said. 

“If no changes are made, USS will implement unaffordable contribution rises from April 2022, escalating every six months and reaching 18.8 per cent for members and 38.2 per cent for employers by 2025.

“Universities are well prepared to mitigate the impact of any industrial action on students’ learning, and minimise disruption for those staff choosing not to take part.”

UCU has been approached for comment.