Leader: Discontent is currency for all ages

Reform of the sector's pension scheme may be essential, but no single option will please everyone - not least students

June 24, 2010

I advise you to go on living solely to enrage those who are paying your annuities," the writer and philosopher Voltaire once wrote. He had lent money to German princelings in return for generous annuities and then cheated them by living for years.

He could have been writing about old and new members of the Universities Superannuation Scheme and today's generation of students.

Students who are already having to stump up for the tuition fees that their predecessors did not have to pay are understandably angry at the notion that Lord Browne's review will recommend that they fork out even more. This will then go to top up the pensions of those who, in their eyes, got away scot-free (an expression that has taken on even more resonance in recent times). The universities and science minister, author of The Pinch: How the Baby Boomers Stole Their Children's Future - And How They Can Give it Back and an expert on pensions, backs their case. In his recent speech at Oxford Brookes University, David Willetts said that it wasn't fair to ask students to pay higher fees to "prop up" final-salary pensions in higher education when their own parents had lost theirs.

USS members don't quite see things like that - they feel cheated. They traded a lower salary than they could have achieved in the private sector for greater autonomy and a decent pension on retirement, which they now see drifting away from them.

Employers, too, are unhappy. They have had to cough up more than they bargained for, having been forced to raise their contribution of earnings from 14 per cent to 16 per cent to meet increased costs, a whopping £110 million a year on top of the £750 million they were already paying annually, money that had to be diverted from elsewhere.

The cause of all this tension is "four different pressures coming together to create a major problem", explains Hugh Pemberton, co-editor of Britain's Pensions Crisis: History and Policy, in our cover story: increasing longevity, falling returns from the stock market, a rise in salaries and universities' use of early retirement as a way of cutting jobs.

Things could come to a head on 7 July, when Sir Andrew Cubie, the independent chair of the USS Joint Negotiating Committee, gives his verdict. The Employers Pensions Forum wants to switch new entrants to a career-average structure. The University and College Union wants to retain final-salary provision. Both are putting Sir Andrew under intense pressure. The UCU has threatened higher education's worst industrial action ever if he uses his casting vote to push through changes. The more hawkish of the employers warn of huge financial damage to the sector without reform.

Career-average can be fairer to the majority than final-salary. But it all depends on the accrual rate - the amount awarded per year of service. What is proposed by the employers is a reduction in current benefits, leaving young academics and administrators entering the scheme worse off than the ones already in it. The UCU may have to hold its nose, go back to negotiations and sell a decent career-average scheme to its members as the best option.

For Voltaire, living longer and enraging those who were financing his extra years was, he observed, "the only pleasure I have left". USS members will just have to hope that they don't end up in the same position.

ann.mroz@tsleducation.com

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