USS: index of anguish

January 8, 2015

In the debate over the level of the salary cap to be introduced into USS pensions, in which members would receive career revalued benefits (CRB) on up to £50,000 of their salary, little seems to have been said about the salary level that individuals retire on and about how the proposals may affect this.

The majority of USS members fall into one of three categories – postdoctoral researcher, academic or academic-related professional support staff. Few, if any, of the postdoctoral researchers will retire from that position as most will leave the sector or go on to become academics. Of the academics, only the most junior would not be affected by UUK’s proposed £50,000 salary cap; and, given current career paths and performance requirements, few, if any, would remain at this level throughout their careers. It is therefore only those in the professional support staff group who may, at current levels, be expected to retire below the £50,000 cap. This, however, ignores the other proposals that UUK set out in its response to the USS consultation.

While the indexing of the £50,000 cap is tied to the consumer price index, actual living costs are related to the retail price index, which the UUK document assumes will be 1 per cent above CPI. Over the 20-year time frame set out in the UUK document, this amounts to a loss of purchasing potential of more than 22 per cent or, put another way, would require the salary cap in 2035 to be equivalent to £61,000 at today’s prices.

Of more concern are the projections UUK makes for salary growth, which are assumed to be at CPI for the first three years and then at RPI +1 per cent. On this basis even those professional support staff currently below the £50,000 salary cap would find themselves above it in about six years. As a consequence, by the early 2020s the defined contribution element of the USS scheme will affect all staff and become an ever smaller proportion of the future pension provision.

In these circumstances, will pre-92 universities be able to attract the staff they need in an increasingly international marketplace where salary levels even in some of the BRIC countries are approaching, or above, those in the UK?

Ian C. Madley
University of Manchester

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