Southampton uni's DB closure proposal poorly timed, experts say

From contribution hikes at Bangor University to amendments to the University of Edinburgh’s scheme, numerous academic institutions have modified their self-administered pension funds in recent years, with a view to moving more in line with the Universities Superannuation Scheme and reducing deficits.

All this news in the press about vice-chancellors getting very high salaries makes this even more of a bitter pill to swallow for the staff

Nicola Rondel, Hogan Lovells

University offers DC, unions want Care scheme

The University of Southampton said that after thorough consideration of a number of options, it is proposing to close the Pensions and Assurance Scheme for Non-Academic Staff, offering members a defined contribution scheme.

“We are now providing members with comprehensive information about the proposals and asking them to give their views as part of a two-month consultation period, ahead of a final decision. The university will also now begin formal consultation with recognised trade unions – following several months of informal talks,” said a university spokesperson.

The consultation, which started on January 12, ends on March 13 2018. If the proposals go ahead, the scheme would close in July and members would be offered a DC scheme from August.

Unions Unison and Unite argue that there is no need to close the DB scheme, and have put forward an alternative paper, explaining why they believe the university’s proposals are flawed. Their compromise involves moving to a career average revalued earnings scheme.

Unison and Unite have highlighted that the current proposals would result in low-paid staff losing thousands of pounds in their retirement.

Adrian Dolby, Unison University of Southampton steward, said: “This is terrible news for support staff, many of whom are on very low wages.”

He added: “In recent years they’ve seen the value of their pay fall, now the university wants to cut their income in retirement too.”

Southampton is not waiting for USS

Tensions in the higher education sector have risen in recent months regarding high pay packages for certain senior university administrators, compared with high tuition fees faced by students and lack of pay rises for teaching staff.  

The sector has also seen strife around pensions, as the USS itself – one of the largest private schemes in the UK – is at the centre of major negotiations regarding its own proposed DB closure.

Higher education employers have argued that this would tackle the scheme’s circa £7.5bn deficit and rising future costs, while continuing to offer attractive benefits to members through the provision of a DC scheme. Formal negotiations between employer and member representatives are expected to end on January 23.

Once a member of university staff reaches a certain point on the pay scale, they must go into the USS scheme. Many of these members tend to be academic staff.

Janet Brown, partner at law firm Sackers, said that with USS’s stakeholders consulting on benefit reforms at the moment, “it’s perhaps unfortunate” that Southampton University is not waiting for the outcome of the USS negotiations.

She said: “Normally institutions wait until USS have made changes, and then they reflect those changes in their benefit structure rather than treat your non-academics in a different way before the academic deal’s sealed.”

However, Brown noted that a pension scheme's valuation cycle could put them in a position where they want to look at benefit reforms straight away.

The University of Southampton said the proposals to close the DB scheme have been timed to coincide with the next triennial valuation in July 2018. Following the last valuation in 2015, it was agreed that an external review of pensions would be necessary.

'A political hot potato'

Brown said the proposed pension changes at the USS and certain universities' vice-chancellors' high pay packages were “a political hot potato" at the moment.

Currently, "it’s really difficult for universities to be conducting large-scale benefit reform without running into difficulties".

Nicola Rondel, counsel at law firm Hogan Lovells, said she imagines the University of Southampton feels “reasonably confident” that the USS consultation will result in the scheme being replaced with DC benefits, and that “they just don’t want to waste any time”.

Unions often push to move to Care in similar situations, but “employers now just want to get away from defined benefit, and so I wouldn’t be surprised if [Care] is rejected as an alternative”, Rondel said.

She also drew attention to the timing of the proposals in relation to media focus on senior managers' pay at universities.

“It’s unfortunate timing that there’s been all this news in the press about [vice-chancellors] getting very high salaries, because that makes this even more of a bitter pill to swallow for the staff,” she said.

This article has been updated to clarify details about USS negotiations.