Levelling the pensions field

June 9, 2000

Keele University could become the first university to bring its academic-related staff into the Universities Superannuation Scheme, under rule changes announced by the USS in March.

A spokesman for the university said: "We have made an inquiry and are awaiting the response from the USS. No decision has yet been taken."

Should Keele go ahead, it will bring higher education one small step nearer a unified pension structure - something that has been desirable ever since the ending of the binary divide.

Traditionally, the USS has covered academics and academic-related staff in old universities, while the Teachers' Pension Scheme covered most academic staff in new universities and higher education colleges, as well as school teachers and further education lecturers.

Non-academic staff are normally covered by local authority pension plans or local schemes run in old universities.

This means that those working in higher education have long had different pension rights - so drastic changes to one pension scheme can bring about greater inequality between staff working in different parts of higher education. This has become an increasing headache as staff have moved between old and new universities.

The table on the right sets out the main differences in benefits between the USS and TPS schemes. USS benefits are higher for children's allowances, spouse's death in service and ill-health retirement.

Lord Dearing's committee of inquiry, which reported in 1997, recommended that, in the long term, all new staff in higher education should become members of the USS. He said that all new-entrant staff should join the USS after the 2001 valuation of the TPS.

The Bett inquiry repeated this recommendation. So what has happened?

In July last year the Teachers' Pensions Working Group reported. The group had been asked to consider "whether it is still appropriate to have a single undifferentiated scheme covering schools, further education and higher education". Again, it was felt necessary to wait until the 2001 valuation. The Universities and Colleges Employers' Association told the working party that it would not wish to move forward on this proposal until the employers' contribution rates in the TPS and USS were more comparable.

The reason for the discrepancy in contributions is that the TPS is a notionally funded scheme. This means the Treasury in effect subsidises the scheme. There is clearly little incentive for employers with the TPS to move to the USS system until the contributions are brought more in line.

Peter Knight, vice-chancellor of the University of Central England, said:

"The government actuary department has said that employer contributions to the TPS will have to rise. There was supposed to have been an increase this year to 8.4 per cent, but it was felt schools could not cope with this. But contribution rates are expected to rise sharply after the 2001 valuation, probably after the next general election.

"When this happens, the employer contributions to the two schemes will quickly come into line and I expect a drift of new universities over to the USS scheme."

The USS changed its regulations in March to allow all people employed at universities to join.

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