Universities must pay more to protect pensions

The University of Essex’s vice-chancellor explains why he disagrees with Universities UK’s position on USS pension reform

February 19, 2018

Is there an alternative to the strike set to hit universities this week?

The overwhelming vote by University and College Union members for 14 days of strike action in 61 universities indicates the strength of feeling about the proposed changes to the Universities Superannuation Scheme.

For many of us, it is the most important issue that we have ever had to confront that relates to our pay – and it will have consequences not just for current academic and professional services staff, but for future generations as well.

So how have we got to this position? During last year’s consultation on the future funding of the USS, we held an open meeting with our staff to help inform the response that the council of the University of Essex would make to the consultation on the future of the pension scheme. This input from staff led to our university council adopting three key positions.

These remain unchanged, and we continue to be an advocate for them.

  • We believe high-quality pension arrangements are a significant part of the benefits available to our employees.
  • We feel the USS trustees are being overly prudent in their assumptions, which will potentially undervalue assets and overestimate potential liabilities.
  • At Essex, we are prepared to consider increasing employer contributions to the scheme, alongside increases in employee contributions, to sustain critical features of the USS, including defined benefits.

Adopting these positions will safeguard key elements of the USS and avoid a highly disruptive strike that places staff who are members of the UCU in the agonising position of balancing their support for student learning, with their commitment to their trade union and a legitimate desire to be a member of a high-quality pension scheme. 

To date, we have failed to win over most universities to our view, with 109 employers stating in their responses to the Universities UK survey that they would be unwilling to increase employer contributions beyond the current level of 18 per cent of salary – with only seven indicating that they were prepared to pay more into the USS to safeguard a high-quality pension scheme. Sometimes principles cost money.

In addition, a majority of universities support the USS trustees in introducing additional elements of prudence into their valuation methodology to reduce the risk of employers having to make additional contributions to the scheme to safeguard benefits should circumstances require this at some point in the future.

As a result, we now have proposals on the table that would see no further benefits being accrued in the defined-benefit sections of the USS – neither the final salary nor the career revalued sections. Instead, all contributions will go into a defined-contribution section termed the USS Investment Builder.

The net impact is a significant reduction in the certainty with which USS members can plan for their retirements.

This is bad news for current USS members; as 960 professors have indicated in an open letter to Times Higher Education, published on 18 January, it will further reduce the attractiveness of the UK as a destination in the global market for talent; and it poses a significant risk to our ability to attract new entrants into the academy.

There is still time to find common ground that will avoid a costly strike that will be painful and disruptive for all sides. UCU members at Essex have told me that they are heartbroken to have to take strike action that they now feel is the only option left to them to express their dismay – and our students have told us that the impact of strike action on their learning experience is a source of consternation to them, at an absolutely critical time in the academic year.

We know that our staff value the defined-benefit component of the USS and to retain it we may need to accept that this will need to operate at a reduced level, to ensure that the scheme is more sustainable and affordable than at present.

Likewise university employers must step up to the plate and commit to increasing employer contributions to the scheme, alongside increases in employee contributions, to safeguard what staff tell us is one of the most important elements of the current scheme.

The USS is a nationally negotiated scheme, and we are bound by the majority view. While the “Essex position” places us in a minority of employers, we will continue to advocate the goal of safeguarding a high-quality and sustainable pension scheme for USS members and use our position on the USS Institutions’ Advisory Panel to do so.

The shared interest of all stakeholders should place an obligation on all parties to look to find imaginative and sustainable ways of delivering this goal – principled compromise is the answer.

Anthony Forster is vice-chancellor of the University of Essex.

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Reader's comments (4)

This sounds like a positive contribution to addressing the current pensions dispute in HE. A most welcome and constructive approach to a challenging area.
Very pleased to hear this contribution to the debate. I wrote to our Vice-Chancellor at the University of Sheffield explaining how the aggregated responses of UUK's membership are precisely what's led to this entirely avoidable crisis: 'Had Universities UK called for Test 1 to be applied in the “loosest possible terms acceptable to the trustee” in March, we calculate that there would have been no funding problem in the 2017 valuation; in other words, the scheme would have been able to continue unchanged. Later, had Universities UK accepted the September valuation, rather than calling for increased de-risking, there would have been affordable solutions for retaining a secure defined benefit scheme, such as those proposed by UCU. Instead, Universities UK have, at each stage, pushed for a valuation that moves the retention of a defined benefit scheme out of reach.' Full text of the letter: http://ucu.group.shef.ac.uk/wp-content/uploads/keith_burnett_18_01_251.pdf
Thanks to Anthony Forster for being willing to put his head above the parapet and talk some sense.
I don’t work at a university at the moment but express my fulsome support to the strikers. You should not have to go through this rubbish. Get the DUP to chip in from their £b1 slush fund.