Talks deadlocked over scrapping of final-salary pensions for academics

April 29, 2010

A decision on whether to wind up the Universities Superannuation Scheme's final-salary pensions could be made this week - but talks between employers' and members' representatives are so far deadlocked.

The USS joint negotiating committee is due to meet on 30 April, the deadline for finding a solution to funding problems.

The USS, the second-largest private pension fund in the UK, had assets of £28.2 billion at 31 December 2009. With benefits promised to members taken into account, this left it with a deficit of £4.7 billion on the technical provisions basis.

An 18-month-long review of the scheme, set up to address problems such as the increasing cost of pensioners living longer, has so far brought no agreement between employers' and members' representatives.

There is a chance that Sir Andrew Cubie, the joint negotiating committee's independent chair, could use his casting vote to decide whether members end up with final-salary or career-average pensions.

Any switch to career-average pensions would affect members currently paying into the scheme, which is open to academic and academic-related staff, mainly in pre-1992 universities. Members would keep the final-salary benefits accumulated so far, but would have benefits after the date of the change calculated under the new system.

Those already drawing their pension would not be affected.

The USS joint negotiating committee is made up of five employers' representatives nominated by Universities UK, working closely with the Employers' Pensions Forum, and five members' representatives nominated by the University and College Union, with Sir Andrew as independent chair.

Although neither UUK nor the UCU would comment until after the meeting, it is thought that there has been no agreement so far.

The employers' representatives are thought to have pushed to end the final-salary structure, calling for a switch to career-average pensions to cut their costs.

The UCU told Times Higher Education in December that it wanted to keep the final-salary structure.

The employers are smarting after being forced to raise their contribution rate from 14 per cent to 16 per cent in October 2009.

Beyond a switch to career-average pensions, other possible funding solutions discussed in the review included later retirement ages and increased member contributions.

Sir Andrew said in a speech to the USS institutions' meeting in November that it was his "unwavering intention to secure an agreed settlement on any future changes", but that "the use of the casting vote provision by me is not off-limits".

However, he could still choose not to use his casting vote, in which case the status quo would be maintained.

Sir Andrew is a former chair of the CBI in Scotland and of the Committee of University Chairs for the UK.

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