Deadlock over pension reform

Final-salary deals still in balance as employers and unions fail to agree. John Morgan reports

May 6, 2010

Employers want to scrap final-salary pensions for new entrants to the Universities Superannuation Scheme and to raise the pension age to 68 - but have failed to reach a deal with members' representatives.

The future of final-salary pensions at the USS is still in the balance after a meeting of the scheme's joint negotiating committee (JNC) last week ended in deadlock.

Formal proposals have been made public, following an 18-month review aimed at addressing funding problems. The USS, the second-largest private pension fund in the UK, had a deficit of £3 billion at 31 March. The scheme has about 120,000 active members - mainly academic and academic-related staff in pre-1992 universities.

Under its rules, any changes in benefits must be decided by the JNC. It is made up of five employers' representatives nominated by the Employers Pensions Forum (EPF); five members' representatives nominated by the University and College Union; and an independent chair, Sir Andrew Cubie.

The EPF proposed:

  • A normal pension age of 65 for most active members, followed by an increase to 68 between 2024 and 2046, in line with changes to the state pension age
  • Final-salary pensions to be closed to new entrants from the date of the rule change, with career-average pensions offered instead
  • Member contributions to increase by 1.15 per cent to 7.5 per cent, with future rises in the contribution rate shared 50:50 between members and employers.
  • The UCU proposed:
  • A 1 per cent increase in employee contributions.
  • A normal pension age of 65 for new entrants.
  • Future contribution-rate increases to be shared 35:65 between members and employers.

Sir Andrew said he was "extremely disappointed" by the failure to reach an agreement.

The next meeting of the JNC is on 7 July - beyond the original April deadline for agreeing changes - when Sir Andrew may have to use his casting vote to back either the EPF or the UCU proposals.

The UCU is to write to all vice-chancellors asking them not to pursue a strategy that would see change pushed through without the consent of members.

The union will ask its members to support its negotiating position in a ballot opening on 10 May.

Michael MacNeil, the UCU's head of higher education, said: "What we've received is proposals that go far beyond what's required to ensure the sustainability of the scheme.

"For somebody new coming into the scheme, (the change to a career-average pension) could mean a loss of tens of thousands of pounds."

john.morgan@tsleducation.com.

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