USS pushes ahead with scheme changes despite strike action

The Universities Superannuation Scheme (USS) Joint Negotiating Committee (JNC) has voted to proceed with Universities UK's (UUK) proposed package of reforms to conclude the 2020 valuation of the scheme, despite ongoing strike action.

The changes will result in a 0.5 percentage point increase in employer contributions to 21.6 per cent from 1 April 2022, alongside a 0.2 percentage point increase in members’ contributions to 9.8 per cent.

The salary cap for the scheme will also be reduced from £60,000 a year to £40,000 a year, with those earning above the threshold receiving a 20 per cent contribution into their individual defined contribution pot, and members' pension accrual rate will be cut from 1/75th of salary to 1/85th of salary.

However, following consultation feedback from members, employers have agreed to pay a further 0.2 percentage point of salary in contributions, to defer the application of a 2.5 per cent cap on future inflationary increases until at least the next valuation, with hopes that mitigations will be in place by then to further delay or prevent the cap.

A UUK spokesperson, on behalf of USS employers, highlighted the decision as "an affordable solution to the 2020 valuation", which provides a "more sustainable platform on which the scheme’s longer-term future can be built".

The stated: “This settlement ensures the continuation of a valuable defined benefit element to the pensions offer while sparing both members and employers from the damaging consequences of much higher contributions from April.

“Employers would rather the scheme was in a financial position where benefit reform was not necessary.

"However, without these reforms costs would have risen to unaffordable levels for employers, while the increased costs for members would have seen more people leave the scheme and miss out on a valuable employer contribution towards their retirement.

“Today’s decision brings a considerable period of uncertainty to an end and gives stakeholders an opportunity to break the cycle of disagreement and dispute ahead of the next valuation.

"Our focus can now return to working collaboratively on alternative scheme designs, a review of the scheme’s governance, and developing lower-cost options and flexibility to give members more choice in their retirement saving.

“Too many members of staff are currently choosing not to participate in USS because the contribution rate is too high, or the scheme benefits are not considered suitable.

“With these reforms enacted, we have a chance to identify improvements and restore all members’ confidence in their pension arrangements at an affordable price.”

However, University and College Union (UCU), which is currently holding strike action in relation the proposed cuts to the scheme, have labelled the plans an “attack” on higher education staff, after employers rejected the union's alternative compromise proposals.

UCU also emphasised that whilst the cuts are based on a valuation of the scheme conducted in March 2020, assets have since recovered to pre-pandemic levels, with the deficit falling from £12.9bn in March 2020 to £2.9bn in January 2022, although this was based on the UUK reforms being enacted, with an estimated £7.3bn deficit without these changes.

In light of this, UCU have confirmed that it will host a meeting of its higher education committee on Friday 25 February, with employers warned to expect more industrial action, including a marking and assessment boycott.

UCU general secretary, Jo Grady, commented: “University vice chancellors have today chosen to steal tens of thousands from the retirement income of staff. This is a deplorable attack which our members won’t take lying down.

"If these so-called leaders of higher education thought this was the end of this dispute, they have another thing coming.

"UCU tried repeatedly to reach a compromise in negotiations, but employers refused even the most modest increases in contributions, instead opting to slash the benefits of staff whilst hoarding billions in reserves.

"UCU’s compromise proposals, which represented the best route out of this dispute, were rejected by employers and the JNC chair.

"These cuts aren’t just an attack on our members’ retirement but also on higher education more widely. Staff know they deserve better than falling pay and massive pension cuts and many will sadly choose to leave the sector. Those considering academia as a career will think again.

"On Friday our union will discuss and decide the next steps in this dispute and that will include reballoting and escalation towards a marking and assessment boycott."

    Share Story:

Recent Stories

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

ESG & DC – creating the right tools
In the latest of our series of Pensions Age video interviews Francesca Fabrizi, Editor in Chief of Pensions Age is joined by Manuela Sperandeo, Head of Sustainable Indexing EMEA, BlackRock and Mark Guirey, Executive Director, Asset Owner and Consultant Coverage - MSCI to discuss some key trends of ESG investing among UK pension funds today. Please click here for an edited write-up of the video

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios