USS sponsor claims members will be ‘priced out’ without reform

The University and College Union is to hold a ballot on strike action later this month after UUK and the USS trustee agreed to reform proposals they say will stave off “ruinous” contribution rate hikes, but which the union argues amount to significant cuts to member benefits. 

UCU released a “benefits modeller” earlier this year that it claimed showed the extent of the cuts under the employers’ proposals, which it said would “devastate” the finances of university staff — especially workers at the start of their careers — and even risk “collapsing the scheme entirely”.

For a typical USS member, the UCU modeller, developed by First Actuarial, showed a cut of more than two-thirds (35 per cent) to the benefits that the individual would accrue if UUK’s counter-proposals were enacted.

To avoid raising the current contribution rates, 9.6 per cent for members and 21.6 per cent for employers, UUK proposed changing the accrual rate, which is the proportion of salary a member receives annually as a pension in retirement, to 1/85 from 1/75. 

It also proposed capping future annual inflation rises at 2.5 per cent and lowering the salary threshold where defined benefit accrual stops to £40,000 from £59,883.65.

UCU argued this would “drastically reduce the guaranteed retirement income of members of the USS, hitting those at the beginning of their careers hardest who are more likely to be on casualised contracts, on lower pay, have substantial student debt, and have fewer assets”.

Now, UUK has published its own “contributions calculator” in a bid to show how much more members would have to pay should the union’s threat of strike action prevent the employers’ proposed reforms from being enacted.

“The USS trustee, which runs the scheme, recently confirmed that it would impose higher contributions from April 2022 without benefit changes,” UUK said.

“This would hit the pay of staff currently paying into USS, with scheme members seeing a 12 per cent rise in contributions in April 2022, followed by a further 17 per cent rise in October 2022.

“A member earning £40,000 would therefore pay an additional £860 in pension contributions in 2022 for the same benefits, with contributions set to rise further every six months until 2025,” it explained.

UUK argued that the contribution rises in April 2022 alone would cost employers an additional £206m a year — “equivalent to nearly 5,200 full-time roles across the university sector”. 

It had proposed its alternative reform package in a bid to stave this off, including a 20-year moratorium on scheme exits and pledges of greater covenant support, in return for a wholesale review of USS governance.

“Figures published today by the USS trustee show that the proposed changes could reduce the amount of pension members receive at retirement by around 10-18 per cent (7-15 per cent when state pension is included) for a range of example members. All benefits earned from contributions to date are safe and will not be affected,” UUK said.

“[UCU] is balloting its members on strike action despite choosing not to put their alternative proposal to the vote at the Joint Negotiating Committee, the official forum for deciding on scheme changes.”

UCU, however, has argued that its own alternative package had not been properly considered, or promised the same level of support employers pledged for their own proposals.

Professor Julia Buckingham, vice-chancellor of Brunel University London, said: “The spectre of higher contributions is causing a great deal of worry for university leaders.

“Staff have worked immensely hard through the extremely challenging conditions forced on us by the Covid-19 pandemic, and it would be an utter travesty if further pension contributions hikes led to more staff not joining the scheme because of the cost, a further exodus of current staff members from the scheme because they cannot afford to pay in more, and mass redundancies as employers have to cut back elsewhere to pay higher pension costs.

“With so much financial uncertainty currently engulfing universities, and the significant financial pressures last year brought due to the loss of commercial income and additional spending to make campuses Covid-secure and move teaching and support online, now is the time to shore up USS by making changes that guarantee good pension benefits without significant additional costs,” she added.