USS controversy ‘raises likelihood of more pension strikes’

UK pension fund rocked by regulator’s concerns, whistleblower’s claims and potential departure of Cambridge college

May 22, 2019
Jenga

The swirl of controversy facing UK higher education’s biggest pension scheme raises the risk of more industrial action, according to academics.

The Universities Superannuation Scheme, which has about 200,000 active members, mainly in pre-92 universities, has been facing intense pressure after:

  • The Pensions Regulator warned that it had “grave concerns” about a proposal on future contributions put forward by the fund to end the dispute with union members
  • A whistleblower claimed that she had been obstructed in her efforts to establish whether the USS’ reported deficit was exaggerated
  • Trinity College, Cambridge, one of the UK’s wealthiest educational institutions, consulted academics about leaving the USS scheme.

Union members went on strike for 14 days last year in protest against proposed reforms to USS pensions, and these latest revelations – which came ahead of the annual congress of the University and College Union on 25-27 May – added to mistrust of the scheme’s managers, said Nick Hardy, Birmingham fellow in the University of Birmingham’s English literature department.

“I suspect all the news that’s come out makes it more likely that delegates will vote for another strike ballot,” Dr Hardy said.

The USS’ latest proposal on future contributions would limit increases in return for bringing the next valuation forward by a year, and Universities UK said on 21 May that its members had indicated their support for this option.

But a leaked letter from Mark Birch, The Pension Regulator’s director of supervision, to Sir David Eastwood, chair of the USS, reveals that the watchdog “would have grave concerns if [this option] was used to justify delaying taking an action that otherwise the trustee would have taken in relation to the [current] 2018 valuation”.

The new option is based on a calculation that the USS’ deficit may in fact be less than half the £7.5 billion figure quoted by the 2017 valuation.

Union members who walked out last year questioned the accuracy of the calculations used to arrive at this figure, and these concerns were given added weight when the Financial Times reported claims by Jane Hutton, a member of the USS trustee board, that she had been obstructed in her attempts to investigate the size of the deficit.

Professor Hutton, professor of statistics at the University of Warwick, told the newspaper that Sir David had instructed USS chief executive Bill Galvin to delay providing her with requested data until the panel had a chance to consider the matter.

Sam Marsh, a teaching fellow in the School of Mathematics and Statistics at the University of Sheffield, told Times Higher Education that the report would “definitely undermine trust in the scheme, but I think trust is already at chronically low levels”.

The University of Cambridge student newspaper Varsity reported that Trinity College’s council had voted to leave the USS amid concerns that the wealthy institution could be called on to prop up the scheme if other higher education institutions went bust.

A leaked letter from Mr Galvin to UUK chief executive Alistair Jarvis said that, “should one more strong employer withdraw from the scheme then the covenant would be downgraded from ‘strong’ to ‘tending to strong’”.

A Trinity spokesman said that the college was “reviewing pension arrangements for its academics” and that “consultation is under way and any decisions will be taken after the completion of this process”.

A USS spokesman said that Trinity’s proposed withdrawal “would, in isolation, have no material impact on the USS’ funding position or overall strength”.

The USS said that “no material issues have been raised by any of the independent experts engaged by the trustee in either carrying out or reviewing the 2017 valuation”. It would be “responding to the regulator, addressing the points raised, in due course”.

nick.mayo@timeshighereducation.com

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