UCU considers legal action against USS and calls for valuation pause

In a letter to USS CEO Bill Galvin, UCU general secretary Dr Jo Grady stated that the USS may have breached its own scheme rules in a way that has affected the ability of employers and members to “negotiate an acceptable outcome”.

According to legal advice given to UCU, the changes proposed to the scheme are “particularly momentous and, in counsel’s view, there can be no doubt that they justify an application to the court for directions”, the letter stated.

The scheme representatives could also be facing other court proceedings, since two university lecturers, backed by a number of UCU branches, filed a wide-ranging legal action against the directors of the USS, accusing them of multiple failings with respect to the controversial 2020 valuation and inaction around climate change commitments.

We are committed to pursuing this argument as far as possible. The outcome could give our negotiators more time to reach an acceptable agreement with employers and it could result in a better resolution to the 2020 valuation, but there are no guarantees at this stage

Jo Grady, UCU

According to the letter from the UCU, the USS did not provide a formal determination on actuarial advice. It added that an increase in the aggregate contribution rate is required following an actuarial investigation, but the scheme provided three separate possible increases to the aggregate contribution rate, rather than a single figure.

The union’s legal counsel has advised the UCU that such a potential breach is “more than just a technicality, based on a semantic analysis of the rule, because of its impact on the Joint Negotiating Committee decision-making process”.

“It means, for instance, that if the UCU sides work up a proposal on one basis, UUK can effectively veto it by withdrawing covenant support. That would, in our view, undermine the entire joint decision-making process and would be contrary to the spirit as well as the letter of the rules,” the letter stated.

In light of the advice, Grady said that the union is asking the USS “to pause the 2020 valuation process and not to complete it, until we can agree a resolution or there has been an application to the High Court to review USS’s decisions and any breach of rules has been remedied”.

In an update to union members, she said: “We are committed to pursuing this argument as far as possible. The outcome could give our negotiators more time to reach an acceptable agreement with employers and it could result in a better resolution to the 2020 valuation, but there are no guarantees at this stage.

“We are awaiting a response from USS to my letter and I will continue to update you as the situation develops,” Grady added.

As Pensions Expert reported previously, the UCU is in the process of determining whether to undertake strike action following a breakdown in relations with employers over the USS’s controversial 2020 valuation, the results of which threatened “ruinous” contribution rate hikes.

Negotiations lasted several months, culminating with Universities UK tabling an 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.