Guest comment: Why universities cannot support ‘no detriment’

The last 18 months have been challenging for universities in many ways. Questions over our future relationships in Europe, funding for teaching, and international students have all contributed to a climate of uncertainty. None of this has been made any easier by the strain on industrial relations caused by the dispute over the Universities Superannuation Scheme (USS).

Since 1975 USS has provided defined benefits to around 400,000 employees across the university sector and beyond (for high-earning staff it is now a hybrid scheme, with defined benefits on salaries up to around £60,000). But like other schemes with defined benefits, it has faced funding challenges, and the scheme’s financial advisers believe there is a substantial deficit which must be addressed to ensure we get the benefits we have paid for. While some commentators have questioned the methodology and approach of USS, the legal position is that USS’s assessment is binding, and the stakeholders (represented by UCU and Universities UK) can only express opinions. USS’s approach is also subject to oversight from The Pensions Regulator (TPR), which has strong legal powers to ensure that pension funds are secure.

Early last year it became clear to all university leaders that the defined benefits USS provides are enormously important to staff. During the strikes, I agreed to go to ACAS to try to find a way of preserving benefits while simultaneously addressing the scheme’s financial challenges. When the agreement we reached proved unacceptable to UCU’s members, the two sides agreed to establish the ‘Joint Expert Panel’ (JEP), to examine aspects of the scheme. Its first report was welcomed by the scheme’s members and endorsed by employers, who subsequently pushed USS to adopt its recommendations.

As a result of the panel’s work, the scheme’s managers agreed to run a new valuation of the scheme. This showed a reduced deficit, but one that must still be addressed. Therefore, to preserve benefits the ‘2018 valuation’ can only be concluded with further changes to contributions. Failure to reach a conclusion would mean that the previously filed ‘2017 valuation’ will stand, and planned contribution increases for October 2019 and April 2020 will be implemented. Although this is a legal undertaking that cannot be undone, it would only be affordable to some employers with job cuts, and it would simultaneously reduce take-home pay for scheme members.

USS have offered three options to UUK and UCU in order to finalise the 2018 valuation, and we now need to decide how to proceed. Out of the alternatives presented, there is overwhelming support among universities for ‘option 3’. It maintains existing benefits and has the fewest risks to both institutions and members: for the next two years it will be significantly cheaper than sticking with the 2017 valuation. This is not simply an exercise in kicking the can down the road: it also gives us space to consider the second report of the JEP, which should help end the confusion and uncertainty that has dogged the scheme over the last eighteen months, and regain the confidence of scheme members following recent controversy over the way things are being run.

On 7 June, along with 68 other heads of USS institutions, I received a letter from UCU which threatened further industrial action if their latest demands are not met. UCU have said they will not support any of the feasible options for the scheme, and are asking us to overturn previous agreements and impose a ‘no detriment’ solution (with contribution rates reverting to their pre-2018 levels). This would be very dangerous. Firstly, it would not be lawful; second, it would not satisfy TPR, which has made its concerns about the deficit very clear; and third, it would derail the progress the JEP has made so far, resulting in much higher contributions. Compared to option 3, the average scheme member would pay an extra £815 a year from April 2020 for the same level of benefits, and much more for many people.

UCU are also demanding that employers pay any additional costs of contributions above the pre-2018 levels. There has been a longstanding agreement embedded in the scheme’s rules that contributions are split 65:35 between employers and members. Breaking these negotiated agreements would have grave implications for the future of all negotiations – and not just for pensions. Importantly, increased contributions of this scale are simply unaffordable for many institutions, and the inevitable result would be redundancies, increased workloads, and reduced investment in our facilities.

I believe, alongside the overwhelming majority of university leaders, that the only feasible short-term solution is option 3. However, because universities are committed to working constructively with UCU, I have written to the union and am very happy to meet with them to explore alternatives to resolve this challenge. Time is against us: without a resolution in the very near future, we face unaffordable large increases in contributions which will have very damaging consequences for us all.

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