UK universities have backed the recommendations of an independent review group set up to examine the valuation of the sector’s main pension fund.
Universities UK, which has represented institutions during the long-running dispute over proposed reforms to the Universities Superannuation Scheme, said that its members supported the main recommendations of the joint expert panel (JEP) published in September, including plans to increase employer contribution levels.
The panel, which comprised six actuarial and academic experts appointed by universities and the University and College Union, was created in March to bring an end to industrial action over plans to scrap the USS’ defined-benefit scheme, which guarantees a fixed income in retirement, put forward by UUK to resolve an estimated funding deficit of £7.5 billion.
In September, the panel suggested that the proposed switch to a wholly defined-contribution scheme could be avoided if employers contributed 20.1 per cent of salary towards USS pensions instead of the current 18 per cent.
In turn, employees would also be required to increase their contributions, from 8 per cent of salary to 9.1 per cent.
A defined-contribution “top-up” scheme, in which employers matched payments up to 1 per cent of salary, should also be abolished, the JEP recommended.
After a consultation of its members, UUK confirmed that “employers support the JEP’s recommendations, subject to acceptance from the USS trustee and the Pensions Regulator, and to further information for employers on risk and its implications”.
“We look forward to discussions with UCU, and with the USS trustee, over the coming weeks as we seek a jointly agreed solution,” UUK added in its statement.
Matt Waddup, the UCU’s head of policy and campaigns, described the acceptance of the JEP findings as a “hugely important step forward for UCU members”.
“The employers’ acceptance of the JEP’s findings demonstrates just how far we have come since this time last year, when the very idea of the guaranteed pension was under threat,” said Mr Waddup, who added that the UCU would “continue to engage with all parties to protect our members’ pensions”.
In late September, the UCU’s superannuation working group accepted the JEP’s findings despite calls from some members for a “no detriment” position, in which employers would shoulder the entire burden of extra costs.
With the UCU and UUK largely united in accepting the JEP’s findings, the issue now lies in the hands of the USS and the Pensions Regulator.
Under the JEP’s proposed rises – which in effect assume a lower deficit than £7.5 billion thanks to improved asset performance, a delay in “derisking” of financial assets and stronger backing from universities to underwrite any deficit – universities and staff would achieve an overall contribution level of 29.2 per cent to fund the current defined-benefit scheme up to £42,000.
However, this contribution is significantly lower than the 36.6 per cent proposed by the USS from April 2020 onwards, so it is unclear whether the USS trustee or the regulator would be willing to accept this more optimistic assessment of the pension fund’s health.