The president of Universities UK has stood by planned reforms to the Universities Superannuation Scheme, in the lead up to unprecedented strike action that will take place across 150 universities.
Professor Steve West said that “action needed to be taken” in response to potentially ruinous hikes to employer contributions that could have followed the 2020 valuation of the scheme.
“It’s never [an] easy decision to change people’s pensions. No one wants to do this. But ignoring the problem and hoping it would go away was not the answer,” he told a media briefing on November 21.
More than 70,000 staff at 150 universities will go on strike for three days in November, in a dispute that also includes a row over pay. Of the universities that will strike, 67 are taking action over pensions.
Many employees may have been forced to reconsider membership of the scheme and potentially opt out
Professor Steve West, Universities UK
The USS 2020 valuation, which yielded a £14.1bn deficit, is at the centre of the dispute. Cuts were proposed that were based on this valuation.
Monitoring reports hint at a recovery in the scheme’s funding level and unions are opposed to reform proposals agreed between the USS trustee and Universities UK, which represents USS employers.
These promised greater covenant support and a moratorium on scheme exits in exchange for a comprehensive governance review. The University and College Union has long argued that cuts to pensions were unnecessary and should be reversed, and has staged several rounds of strike action.
The strikes are scheduled to take place on November 24, November 25 and November 30.
UUK also provided an update on the work of a new technical group in the lead up to the scheme’s next valuation, which is exploring introducing more flexibility to the scheme, including offering members the opportunity to lower their contributions.
‘The funding position is fragile’
On October 27, the UCU claimed that a recent USS update “shows the scheme is in such a healthy position that those lost benefits could be paid back – backdated to April – and still leave the scheme in surplus”.
In 2020, the USS trustees calculated that pension contributions as high as 56 per cent of salary would be required to fund past pension promises and to pay for future benefits, according to West.
The package, developed in response to the valuation, includes covenant support worth £13bn of contributions every year, he continued. Contributions would increase up to 21.6 per cent of pay from employers and 9.8 per cent from employers, while changes to future benefits were also planned.
Without these reforms, members would have seen their contributions rise from 9.8 per cent of pay to at least 11 per cent of pay from April 2022, and 11.8 per cent of pay by October 2022, West said.
Employer contributions would have risen from 21.6 per cent to 23.7 per cent from April 2022, and 25.2 per cent from October 2022. This would have risen again in April 2023.
“It’s worth remembering that there are over 340 employers in the scheme, and many of them are not universities,” West said, including small charities and research institutes “that could be crippled by such increases”. Thirty per cent of universities are already in financial difficulty, he added.
“Many employees may have been forced to reconsider membership of the scheme and potentially opt out,” he said.
West stressed that the monitoring reports regularly cited by the UCU, which indicate a healthier funding position since the 2020 valuation, are “not comparable to a full valuation”.
“The funding position is also fragile,” he added, which is “reflective of the broader economy and global prospects for growth”.
Members could temporarily pay lower contributions
West expressed his frustration at the balloting process that has led to the strikes, which he claimed has seen only around one in 10 USS members voting in favour of industrial action. “It’s not too late to be averted,” he said.
UUK head of pensions Stuart McLean, meanwhile, admitted that the stringent regulation had been a “source of tension” during recent valuations.
Universities set for ‘biggest ever’ strikes over pensions
More than 70,000 staff at 150 universities will go on strike for three days in November, in the latest escalation of a dispute that includes disagreement over the valuation of the Universities Superannuation Scheme.
UUK and the UCU are co-operating through a newly founded technical group to identify more flexibility for USS members, West said.
“Work also includes production of an accelerated valuation timeline,” he continued, along with work on the design of the scheme and “ways for it to be more flexible and appealing to staff by, for example, allowing them to pay lower rates of pension contributions for a short period of time”.
In West’s own university, the University of the West of England, there are large numbers of staff on “relatively low incomes” who are unable to afford pension contributions, he revealed.
