Call to end ‘postcode lottery’ of tuition fee cash for pensions black hole

UEL vice-chancellor says it is wrong that students’ money is used to prop up local government schemes

November 6, 2014

Students should not be asked to pay millions of pounds a year in tuition fees to bail out deficit-laden local authority pension schemes in which universities are forced to participate, a finance chief has said.

Dusty Amroliwala, the deputy vice-chancellor and chief operating officer at the University of East London, says it is unfair that students at some universities, including his own, are expected to pick up the tab for local government schemes.

About 52,000 university staff currently contribute towards roughly 80 separate local government pension schemes because of laws that state that former polytechnics must stick with the fund provided by their local authority before they gained university status in 1992.

Some schemes have performed well over the years, but others are now running large deficits, with some universities paying nearly 30 per cent in employer contributions.

That is about twice as much as the 16 per cent of salary that pre-92 universities currently contribute towards the Universities Superannuation Scheme or the 14.1 per cent paid by institutions towards the Teachers’ Pension Scheme.

Mr Amroliwala said it was wrong that UEL, which will pay 28.1 per cent of salary towards the Barking and Dagenham Local Government Pension Scheme from 2016, also had no control over the scheme’s investment strategy nor its benefits package.

Universities are also unable to withdraw from their local scheme or agree a deal to pay off their own portion of any deficit, he added.

“To have a law that says we must be part of a pension scheme that we cannot control is crazy,” said Mr Amroliwala, a former director of the Civil Service Workforce.

“We are spending a significant amount of UEL money each year, which comes directly from students’ pockets, on bailing out the public sector deficit,” he added.

Students were paying a “significant amount to a local authority to put right their pensions strategy”, he added.

The Barking and Dagenham pension fund’s deficit more than doubled between 2007 and 2010 to £180 million, according to its latest annual report.

In effect, there was a “postcode lottery” in which some universities had millions of pounds extra to spend on students than those who were shackled to poorly performing schemes, Mr Amroliwala said.

For instance, Middlesex University contributed .6 per cent of salary to an LGPS in 2012-13 whereas Anglia Ruskin University had to pay only 10.5 per cent, according to their annual accounts.

At Birmingham City University, the level was 13.4 per cent while at London Metropolitan University it was 18.6 per cent.

Concerns over some LGPSs have arisen despite closure of their final salary schemes in April, with staff now accruing benefits on a career average basis.

From next April, about 42,000 higher education staff who contribute to the TPS will also accumulate benefits in this way.

Similar plans for the USS, which will also include a defined contribution element for higher earners, are currently the subject of a battle between employers and unions with a marking boycott by academics over the issue set to begin this week.

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