When it comes to academics' highly regarded pension arrangements, the status quo is not an option, according to Bill Wakeham, chair of the Employers' Pensions Forum, writes Melanie Newman. "An ageing population, recent legislative changes, lower interest rates and low investment returns, an increased tax burden and the Government's ongoing pensions reform programme are factors that affect all employees and employers," said Professor Wakeham, vice-chancellor of Southampton University. "The higher education sector is not immune from these forces and we must respond to them.
"The high cost to institutions has to be addressed," he said.
Among options being discussed, The Times Higher can reveal, are plans to close two existing higher education pension schemes to all new entrants.
Tony Bruce, head of policy at Universities UK, told The Times Higher that, as part of a wide-ranging review of the future of pensions in the sector, "closing the Teachers' Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS) to new entrants is one of the issues we will be looking at".
New entrants would enter either the Universities Superannuation Scheme (USS) or "some other platform", Mr Bruce said. "We would have to look at whether universities would agree and obviously it would also require government approval." Ninety-six institutions currently participate in the LGPS, with a similar number participating in the TPS.
Mr Bruce also floated the possibility of a change to the retirement age, an option that was not discussed in this week's UUK report, Strategic Enquiry into the Pension Arrangements for the Higher Education Sector.
"There's already a proposal in USS to raise the retirement age, which hasn't been agreed, and there is talk in the economy generally of an increase from 65 to 67 in the next two years. That would be one way of accommodating increased costs," he said.
UUK's survey of 87 institutions found a lack of consensus about whether radical changes to the style, structure and financing of pensions were necessary. Post-92 universities, which have the most employees in the TPS and LGPS, said they regarded current pension costs as too high and were most in favour of radical change.
Most respondents said higher education should benchmark pensions benefits against the public sector rather than the private sector. Recent years have seen substantial revisions to private-sector pensions, with widespread closure of final-salary schemes. The public sector, by contrast, has retained final-salary schemes. The LGPS and TPS survived as final-salary schemes following reviews.
Despite the lack of enthusiasm for radical change, responses to a question on risk-sharing in the UUK survey showed a "startling" level of agreement that employees should share the risk of future cost increases. "This would represent a significant move in the design and/or funding of the pensions offered in higher education," the report notes.
Current USS rules say that employers will meet the cost of providing benefits over and above the normal contribution of 6.35 per cent paid by members.
USS employers have already agreed to one measure to tackle rising costs. Since December 2006, individual universities have been charged for the cost of early retirement before 60. USS is to carry out another valuation in March 2008, which will further clarify the extent of cost pressures.
University and College Union general secretary Sally Hunt reminded employers that while the union was prepared to negotiate changes in provision, members of the USS tend to see pension contributions as "deferred salary".
'I WAS LOOKING TOWARDS THE FUTURE'
While the final-salary pension scheme wasn't the only reason Robin Clark moved from the private sector into higher education, it was certainly a major factor.
Dr Clark, a senior lecturer in Aston University's School of Engineering and Applied Science, explained that he used to work for a railway engineering company in the US.
"There you get sent regular statements telling you how the (pension) share portfolio is performing, and you can move it around if you like."
When he decided on a career shift, the prospect of a secure, generous pension helped drive his choice.
"A pension is very important to me. One of the reasons I looked at higher education was that I was at the stage in my life when I was looking for security.
"I have young children and I was looking towards the future. I thought that if I was in a small, private firm my pension might not be worth as much."
- Tariq Tahir.
'IT WOULD BE TERRIBLE TO LOSE IT'
Gillian Howie, senior lecturer in philosophy at Liverpool University, said the prospect of the final-salary pension being replaced was "alarming".
"It (the final-salary pension) is definitely an incentive for public sector workers and it helps to make up for salaries that only just keep up with inflation.
"It is definitely a very good pension scheme and it would be terrible to lose. If that happened staff would feel undermined.
"This is part of the marketisation of academia, with some staff being treated differently from others. It will undermine the whole collegiate atmosphere."
Dr Howie predicted that some attitudes among academics would change.
"There will be a lot more common interest cutting across all public sector workers. You will see academics really identifying with other public sector workers in ways they haven't done in the past."
- Tariq Tahir.