Guest comment: UCU pension contributions proposal unworkable for smaller organisations

Demands for drastically increased employer contributions to the Universities Superannuation Scheme (USS) risk overwhelming smaller organisations like the Overseas Development Institute (ODI) and the work we are doing to end poverty, address crises and avert climate catastrophe.

It may come as a surprise to many people but the main pension scheme offered to staff at ODI is USS. ODI is an independent, global think tank working for a sustainable and peaceful world in which every person thrives. We are committed to harnessing the power of evidence and ideas to promote better and more effective policy making.

As a research-based organisation, sixty years old next year, our origins are from higher education, with some of our current research and other staff at one time having been employed by a university. But that is where the similarities end. As a registered charity, we are funded largely by donations and research partnerships, and since we deliver no teaching we do not have access to tuition fees or government teaching grants like our university counterparts.

Being able to offer the USS pension to our staff has its considerable benefits. Over 70 per cent of our staff are eligible to join USS. It enables us to provide market-leading defined benefits on salaries up to around £60,000 (nearly 90 per cent of our staff fall under this threshold). And, as the scheme is backed by the collective financial strength of the UK’s world-leading higher education sector, we can be confident that our employees’ benefits are secure for when they retire.

However, being part of USS is also not without its challenges.

The current dispute is between Universities UK, representing employers, and the University and College Union (UCU), speaking for scheme members. ODI is not a university, and our recognised trade union is Unite, which is common for the charity sector.

Therefore, ODI staff have no formal representation in the current dispute and, apart from statutory USS consultations, have little opportunity to have their say on the big changes that the scheme tells us are necessary. One of the most common questions we get from our new starters is why they have to pay such high contributions towards their pension, and whether they can instead choose to pay in less, or even pay into a different pension scheme, which they cannot.

The majority of our staff live in London where the cost of living is very high. Even before last year’s valuation and the resulting increase to 8.8 per cent of salary in April, this regularly came up as part of staff engagement. Looking forward we will likely see many staff choose to opt out of the pension scheme as it becomes increasingly unaffordable for them.

As a small charity, employer contributions of above 18 per cent of salary are extremely challenging for us to fulfil. Indeed, it is beginning to affect our competitiveness in the employment market as our employer contributions to USS mean we are unable to offer the range of benefits offered by other employers because of the costs involved. The employer pension contributions in our peer organisations are on average less than 10 per cent.

Unfortunately, ODI does not have the asset wealth of scheme employers like Trinity College Cambridge, so buying ourselves out of USS is simply not an option. We are sticking with the scheme. But the prospect of contributions above 21.1 per cent of salary – as demanded by UCU – would put us under extraordinary financial pressures.

In the last year ODI’s work has shone a light on the plight of Rohingya refugees in Bangladesh, actively supported the health and wellbeing of adolescents in Ethiopia, and developed solutions for environmental sustainability through new technologies including blockchain.

We want to continue this life-changing work, but if substantially higher pension contributions do come into play, we risk not being able to take on the research the poorest and most vulnerable people around the world need us to do. We will only be able to afford to take on the most profitable commissions.

This is why we reluctantly support the current proposal – with employer contributions of 21.1 per cent of salary – as the least-worst option for concluding the current valuation. We simply cannot afford to pay anything higher.

The proposal also allows UCU and the employers’ Joint Expert Panel to provide further recommendations on the future of USS, including scheme design, which we believe is vital for its long-term sustainability. We will be keeping a very keen eye on this, and hope that it provides some possible solutions for the smaller, non-university employers such as ourselves.

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