Warwick's support staff to lose defined benefit scheme

Growing fund deficit leads to reforms criticised for creation of a 'two-tier' system. John Morgan writes

April 15, 2010

The pension deficit for higher education support staff grew by £1 billion last year, with the University of Warwick to become the latest institution to close its defined-benefit scheme.

The Equality and Human Rights Commission (EHRC) has written to Warwick to ask whether downgrading pensions for support staff could have a disproportionate impact on women, who unions say make up 70 per cent of employees in the worst-affected pay grades.

Self-administered trusts (SATs) providing pensions for support staff - usually on salary grades one to five - are run by 48 universities, mostly pre-1992 institutions.

Post-92 universities contribute to the Local Government Pension Scheme (LGPS) for their support workers.

Against a background of increasing life expectancy, pay rises and a tough stock market, in 2008-09 the gap widened between the value of the funds and the cost of the benefits promised.

Universities' combined deficits in SATs and the LGPS rose from £2.4 billion in July 2008 to £3.5 billion in July 2009, according to figures cited by the Higher Education Funding Council for England.

Academic and academic-related staff are eligible for the defined-benefit Universities Superannuation Scheme (USS) and Teachers' Pension Scheme (TPS), which do not require individual institutions to list assets and liabilities in their accounts.

Warwick has completed a consultation on proposals to close its final-salary support-staff scheme to new entrants, and will shortly announce the results to members. It is set to close the scheme.

Instead of a defined-benefit deal in which the value of pensions is certain, new support staff would enter a defined-contribution scheme, in which the value of the pension received is not guaranteed and relies more on investment fluctuations.

A Warwick spokesman said that its SAT's £45 million deficit "itself isn't a problem". Rather, the key factor in the scheme's lack of sustainability is that the deficit "continues to grow".

The spokesman added that the university had replied to the EHRC to say it did not believe that its plans would have a disproportionate impact on female staff.

Ben Thomas, Unison national officer, said there would be a "two-tier" pension system at Warwick, with academics enjoying better benefits than support staff and women suffering the most.

Mr Thomas said better options included a career-average structure, allowing all staff to join the USS, or the merging of Warwick's fund with the Superannuation Arrangements of the University of London scheme.

The University of Sussex is among the institutions to have closed defined-benefit schemes for support staff, while the University of Bristol is "considering a number of potential changes to the structure of the scheme to achieve a more sustainable risk and cost profile".

john.morgan@tsleducation.com.

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