Employers will not be able to meet the demands from the University and College Union (UCU) of rejecting the three options presented by the Universities Superannuation Scheme (USS) trustee, according to Universities UK (UUK).

Option one is a fixed contribution rate of 33.7 per cent, option two is a rate of 29.7 per cent along with “significantly strong contingent contribution arrangements” and option three was a fixed rate of 30.7 per cent until October 2021, when it would increase to 34.7 per cent.

However, UCU wanted USS to reject all of the options as they did not meet its policy of ‘no detriment’, which means no increases in contributions and no cuts to pension benefits.

UUK said that if employers were to reject all the USS proposals, there would be delays to compiling the 2018 valuation. If a decision on the 2018 valuation is not made, UUK noted that “it is likely that the USS trustee will conclude the valuation in a manner that it deems appropriate, which could be in line with option one”.

It also noted that The Pensions Regulator (TPR) has made it clear to USS that it would “have concerns and likely questions regarding an outcome in line with option three which provide contributions of 30.7 per cent of salary”.

Option three would therefore be at “the very limit of acceptability” and it would be “completely unrealistic” to expect the USS trustee to consider proceeding with a valuation that delivers contributions of 26 per cent with no benefit changes.

The 2017 valuation has been filed with TPR, so UUK says that refusing to pay additional contributions “would be unlawful and would provoke legal action” and that there would be no legal basis where employers could make a commitment to keeping contributions below 26 per cent.

UUK also stated that it would be unreasonable to expect employers to pay the full cost of any additional increased and the 35:65 cost sharing formula between members and employers is “embedded in the scheme as the default basis on which increased costs should be shared".

In its letter, UUK said that employers consider option three to be the best available option for the conclusion of the 2018 valuation. The contribution rates that would apply under option three are 21.1 per cent of salary for employers and 9.6 per cent of salary for members, and would not see changes in the level of benefits.

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