Deficits threaten final-salary schemes for support staff

Universities seeking alternatives are accused of unfairness by unions, writes John Morgan

January 14, 2010

Final-salary pension schemes for support staff are under review at a host of universities.

Individual institutions report deficits of more than £100 million and employer contribution rates greater than 20 per cent, Times Higher Education has learnt.

Most of the UK's pre-1992 universities operate their own final-salary pension schemes for non-academic staff.

The universities' annual financial statements reveal widespread concern at rising costs brought by higher salaries, people living longer and falls in the value of investments.

Institutions' worries echo those reported by THE last week about the nationally run Universities Superannuation Scheme (USS), a final-salary scheme for 120,000 academic and professional members.

But unions say universities are pre-empting a review of the USS' structure to ditch final-salary pensions for support staff, unfairly penalising lower-paid, mainly female workers. It is estimated that 50,000 support staff are currently paying into the funds.

The University of Warwick, whose fund had a £45 million deficit at July 2009, has proposed closing its final-salary scheme, a step already taken by universities such as Sussex and Birmingham.

Instead of the defined benefit of a final-salary scheme, Warwick support staff would be given a defined contribution scheme - in which the value of the pension received is not guaranteed and relies on the changing value of investments.

The universities of Cambridge and Edinburgh reported deficits of £182.7 million and £101.6 million on their respective funds at July 2009, the most recent figures available, along with employer contribution rates of 23.7 per cent and 20.3 per cent, respectively.

Edinburgh says in its annual report that the fund's position is "of great concern", while Cambridge is "actively exploring the options to ensure that this scheme ... remains affordable and sustainable".

The University of Leeds, which saw its fund drop from a £4 million surplus to a £31 million deficit in a year, warns in its annual report that there is "significant cause for concern over the affordability of our final-salary pension schemes (USS and its own fund), which we cannot ignore and which will need to be explored in due course".

In post-1992 universities, support staff are eligible for the final-salary Local Government Pension Scheme.

Mike Robinson, national education officer for Unite, said the closure of final-salary schemes at pre-1992 universities would create a "three-tier workforce" divided between USS members, support staff on final-salary arrangements and support staff on lesser benefits.

Mr Robinson has written to Nigel Thrift, the vice-chancellor of Warwick, urging him to save the final-salary structure by entering the Superannuation Arrangements for the University of London, which covers a range of organisations.

Ben Thomas, national education officer for Unison, described changes to the schemes as "both morally and legally questionable".

"You are effectively cutting the pensions of predominantly female staff and low-paid staff, compared with predominantly male, high-paid staff," he said.

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