The UK's largest trade union for academics is debating whether to submit counter reform proposals for the Universities Superannuation Scheme, as negotiations continue over the future of one of the UK's biggest remaining final salary pension schemes.
The proposals have prompted threats of strike action from the UCU, which claims the changes would cost members thousands of pounds in benefits annually.
Proposed changes to USS
Final salary section to be closed to future service. Final salary benefits will be based on the final pensionable salary at the date of closure and revalued each year in line with consumer prices index.
All members will continue to receive DB benefits through the existing career average section, accruing at 1/80 of salary plus tax-free cash of 3x pension up to a proposed threshold of £50,000 a year, provided it is affordable for employers.
Beyond the £50,000 pension benefits would accrue in a new DC scheme, with member contributions of 6.5 per cent and employer contributions of 12 per cent.
Members will be able to make additional contributions to the DC section of up to 1 per cent of salary, matched by the employer.
It is proposed that member contributions remain at 6.5 per cent of salary, subject to the trustees agreeing the £50,000 threshold is affordable.
Employer representative body Universities UK had proposed closing the final salary section of the USS, which closed to new members in 2011 and a career average benefits section was opened.
Michael MacNeil, head of bargaining at the UCU, said there were “big holes” in the proposals, saying they did not make clear issues such as how the defined contribution scheme would address the forthcoming Budget flexibilities, what earnings would apply to the threshold or how variable hours contracts would be dealt with.
“There is a discussion within the union about formulating counter proposals,” said MacNeil. He added any potential proposals would be submitted at a meeting with the funding and benefits working group of the USS.
A Universities UK spokesperson said the employers' proposals to reform the scheme were based on detailed advice from industry experts and actuaries.
“USS modelling work on the possible impact of these proposals for scheme members is based on assumptions agreed between the employers and UCU, and has been shared with institutions," the spokesperson added.
“The employers are committed to continuing negotiations with UCU to seek a joint proposal for reform that offers an affordable, flexible and attractive pension scheme, for both current and future members, which is sustainable for the long term.”
Members of the final salary section would be moved into the career revalued benefits section, where they would accrue benefits up to a £50,000 salary threshold, after which they would accrue pensions in a DC scheme at contributions of 6.5 per cent from members and 12 per cent from employers.
How the scheme is responding
The proposals are intended to help address the growing deficit within the USS, which grew to £11.5bn in March 2013 from £2.9bn in 2011. A factsheet on the proposals produced by Universities UK predicted the deficit at March 2014 would be around £8bn.
A spokesperson for USS said: “The trustee anticipates it will report a substantial deficit when the 2014 valuation is complete and has been supporting [the joint working committee] in discussions around the appropriate response to the current funding challenges.
"These discussions are progressing with both parties preparing formal proposals for benefit changes to present to the Joint Negotiating Committee.”
The spokesperson added the trustee had regularly highlighted to members the funding challenges faced by the scheme and had indicated the scheme arrangements would need to be reviewed. It has also made information available on the scheme website.
They said the outcome of this year’s triennial valuation would be “inextricably linked to the discussions around benefit changes", adding: “Regular updates on the valuation are provided to the Joint Negotiating Committee, so that it can consider the implications of proposed benefit changes on future contribution requirements.”
