Union slammed as ‘at odds with reality’ as USS strike action begins

As Pensions Expert has reported previously, employers have been locked in a dispute with UCU and the Universities Superannuation Scheme trustee over plans to address the deficit revealed in the scheme’s controversial 2020 valuation.

Despite striking a new agreement with the trustee over covenant support and other measures, which will supposedly stave off “ruinous” contribution rate increases, employer group Universities UK has been unable to persuade UCU to back its plan, with the latter set to begin strike action on Wednesday.

UCU has criticised UUK’s attempt to push through proposals to resolve the long-running 2020 valuation dispute that will allegedly see cuts to member benefits of as much as 35 per cent, though UUK disputes this figure, arguing that it does not account for defined contribution elements of the scheme.

In a letter, the union called on UUK to consult with employers on withdrawing their “unagreed detrimental changes to members’ pensions”, to ask whether they would be prepared to pay higher contributions for a fixed period of time to allow for a negotiated settlement, and to publicly call for a new 2021 scheme valuation.

On the eve of the strikes, UUK has struck back, branding the union’s claims “at odds with reality”.

“It is deeply frustrating to be facing industrial action over USS pensions. Employers and UCU share the goal of a secure, valuable and affordable retirement income for university staff,” UUK said on Tuesday.

“Despite a great deal of constructive work between employers, the USS trustee and UCU, a small minority of staff seem determined to strike in protest at economic conditions they do not like, and a regulatory regime that universities are powerless to change.”

The employer group pointed out that only one in four USS scheme members are also UCU members, and that the union’s own strike ballot showed support for strike action only amounted to around 40 per cent of its members, which in turn represents less than 10 per cent of active members in the USS.

UUK encouraged the remaining 90 per cent to make their opinions known through its ongoing consultation, which closes on January 17 2022.

“It is also important to note that only 37 of 340 USS employers are facing strike action. UUK takes its mandate for negotiations from all 340, who pay the same level of contributions and have jointly given significant financial backing to the scheme worth £1.3bn a year — which has made a critical difference in being able to retain a valuable guaranteed defined benefit element in the proposal,” UUK said.

It added that employers have “repeatedly made clear” that contributions of 21.4 per cent are the limit of what they can afford without significant cost-cutting in other areas, though UCU has previously argued that employers failed to pledge equivalent support for its own alternative proposals.

“If reforms are blocked, employers and members face a punishing contributions escalator, rising every six months to completely unaffordable levels — 38.2 per cent of salary for employers, and 18.8 per cent of salary for members by 2025. To put this in perspective, for employers, every additional 1 per cent of salary is equivalent to nearly £90m,” UUK continued.

The employer group has previously tried to rebuff UCU’s calls for a new valuation, which the union said would better reflect the reality of scheme financing. The union contends that the 2020 valuation was held at the low-point of the Covid-19 pandemic and therefore does not account for the subsequent rebounding of assets.

In its statement, UUK reiterated that the challenges facing the USS “have existed for decades” and will persist unless changes are made. 

“Interest rates have been at record low levels and people are living much longer than when the scheme was set up in the 1970s. As a result, the scheme’s liabilities are increasing at a greater rate than assets and the cost for providing future guaranteed benefits has increased significantly,” it said. 

“Despite a recovery in assets since March 2020, the scheme’s long-term trajectory means there is a chance pensions cannot be paid in full in future.”

It accused the union of opposing reform for ideological reasons and of denying “that the cost of providing a DB pension has risen”, calling UCU’s claims “at odds with reality” where nine in 10 DB schemes have closed because of “increased costs”.

“Changes to the scheme are therefore necessary. Until UCU acknowledges this it will be impossible to resolve the dispute and students will continue to suffer. It is unrealistic to expect that strike action against 37 employers will somehow lead to fundamental reform of the way pensions are regulated in the UK,” UUK argued.

“It is never an easy decision to change people’s pensions — no one wants to do this — but ignoring the problem and hoping it will go away is not the answer.”