Existing benefits offered by UK higher education’s biggest pension scheme could be preserved if members paid an extra 1.1 per cent of their salaries into the fund, a much-anticipated report has suggested.
The report of a joint expert panel, set up after university staff went on strike in protest at plans to end defined benefit payouts from the Universities Superannuation Scheme, says that these could continue if employees contributed 9.1 per cent of their salary, rather than the current 8 per cent.
In turn, employers would need to contribute an extra 2.1 per cent, taking their contributions from 18 per cent to 20.1 per cent.
This overall contribution level of 29.2 per cent is significantly lower than the 36.6 per cent proposed by the USS from April 2020 onwards to continue the defined benefits, based on the existing estimates of a £7.5 billion deficit in the fund.
It is also a significantly less radical proposal than Universities UK’s plan to end defined benefits and instead shift members on to a defined contribution model under which payments would have been dependent on investment returns. This proposal prompted 14 days of strike action at 65 mostly pre-92 universities earlier this year.
The panel, made up of pension experts appointed by UUK and the University and College Union, believe that their proposal – which would also entail an end to an existing defined contribution top-up scheme, known as the match – could be afforded by delaying “de-risking” of the USS scheme for a decade and by increasing reliance on the covenant under which universities underwrite any potential shortfall in funding. It also presumes that the USS’ £64 billion investment fund will perform better, and uses more up-to-date mortality data than previous evaluations.
The 112-page report was welcomed by both sides in the dispute, with Sally Hunt, the UCU’s general secretary, calling it a “significant landmark in our ongoing campaign to defend members’ pensions”.
“We welcome the [panel’s] proposal that the valuation should be adjusted,” she said.
Alistair Jarvis, UUK’s chief executive, said that he hoped it would “create the space for UCU and UUK to find common ground” on the fund’s future. He said that consultation will start next week with employers, including on their “willingness to accept greater levels of risk and to pay more into the scheme than their current contribution level”.
Joanne Segars, the panel’s chair, said she and her colleagues had been able to draw on the “benefit of hindsight” about the valuation.
The combined effect of the proposed changes “would satisfy the employers’ overall appetite for risk as well as members’ desire to maintain broadly comparable benefits and would provide a constructive negotiating space for the stakeholders to reach a consensus on the way forward,” Ms Segars said.