Employers urged to halt USS changes amid funding improvements

Universities Superannuation Scheme (USS) employers have been urged to reconsider changes to the scheme, after a report from the USS trustee suggested that the level of contributions required to service the deficit had fallen to 0 per cent.

The changes to the scheme were voted through by the Joint Negotiating Committee (JNC) in February 2022, despite ongoing strike action, and are scheduled to come into force today (1 April).

However, the University and College Union (UCU) has urged UUK chief executives to halt the planned changes to the scheme and instead support the alternative proposals put forward by UCU.

As part of this, the union has called for an updated valuation of the financial health of the scheme as at 31 March 2022, after figures from the trustee's financial monitoring report suggested that a new valuation conducted at this point of time would result in the deficit falling by more than 85 per cent.

In addition to this, the updated figures based on the 2020 valuation interim monitoring approach revealed that assets had “significantly” increased from £66.5bn on 31 March 2020 to £88.8bn as at 28 February 2022.

It also showed a fall in USS Investment Management’s long-term return expectations, which has reduced the discount rates and increased liabilities since the valuation date.

As a result, the indicative technical provisions deficit has fallen from £14.1bn on the valuation date to £2bn at the end of February.

Furthermore, whilst the indicative future service cost is slightly higher than at the valuation date, the USS trustee suggested that the lower deficit would reduce deficit recovery contributions, leading to an overall lower contribution requirement.

However, a Universities UK (UUK) spokesperson, clarified that the USS made clear this week at the JNC that without the latest reforms, it would not have seen such an improvement in the funding position, which "remains very volatile month-to-month".

“The USS trustee has also indicated that the required rate for previous benefits would likely be in excess of 40 per cent of salary – even with the same level of covenant support employers have pledged under the package of reforms,” they continued.

“Should the conditions seen in the last month prevail at the next valuation, it may be possible to reduce contributions or increase benefits or some combination of both.

"We remain open-minded about the optimal timing for the next valuation and look forward to seeing the more in-depth analysis of the position at the end of March 2022, which should be ready in May.”

The report itself also emphasised that the figures are not intended to be used as a basis for advice without further consideration and are not intended to contribute in whole or in part to any decisions made by the JNC, clarifying that the approach adopted is not as accurate as when determining the liabilities in a one-off calculation.

Despite this, UCU has urged vice-chancellors to "seize the moment", and revoke the planned changes to the scheme in light of the suggested funding improvements, also calling on scheme members to sign an emergency petition for the JNC chair to support the UCU’s position.

UCU general secretary, Jo Grady, commented: “University staff have known all along that these pension cuts are unjust, unnecessary and premised on a deeply flawed valuation conducted in the middle of the pandemic. Today they have been vindicated.

“The strong performance of the pension scheme has seen its assets reach unprecedented levels with growth now outstripping liabilities.

"Vice chancellors must now seize the moment, revoke these cuts and end the industrial strife which has so far seen universities hit by up to 18 days of strike action. A failure to do so will put rocket boosters onto our campaign to get the vote during the final week of industrial ballots.

“By accepting the latest financial report from the trustee, accepting UCU’s compromise proposals and agreeing to a new valuation, employers can not only protect the benefits of staff but ensure they don’t waste money closing a deficit that no longer exists.

“If vice chancellors instead choose to rely on a flawed valuation, conducted in March 2020 whilst markets crashed due to Covid, and use it to slash employee benefits then questions must be asked about why they are ideologically committed to harming their staff, even when doing so harms the university’s own finances."

Universities have faced ongoing strike action as a result of the proposed changes to the scheme, with a number of universities currently being balloted on further industrial action in 2022, including action short of strike, which UCU warned could stop "hundreds of thousands" of students from graduating.

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