Willetts' critical position on final-salary pensions

June 17, 2010

David Willetts has applied extra pressure to the pension-reform process, saying that students should not be expected to "prop up" the academy's final-salary deals.

The comments by Mr Willetts, the universities and science minister, came ahead of a possible decision next month on whether to drop the Universities Superannuation Scheme's final-salary provision.

In a speech at Oxford Brookes University last week, Mr Willetts said that the previous government "did not push universities sufficiently" to improve the student experience and reduce costs as a quid pro quo for introducing top-up fees in 2004.

Mr Willetts added: "It's very hard asking students to pay higher fees to prop up final-salary pensions ... when their own parents have lost theirs."

Many employers will interpret the comments as a warning that the government will not allow any extra funds arising from Lord Browne's review of fees and funding to go into unreformed higher education pension funds.

Mr Willetts' contribution to the debate will increase the pressure on Sir Andrew Cubie, independent chair of the USS joint negotiating committee, who may have to use his casting vote on 7 July to decide between employers' and members' conflicting proposals.

The Employers Pensions Forum wants to switch new entrants to a career-average structure. The University and College Union wants to retain final-salary provision, while raising member contributions and sharing future costs 65:35 between employers and members.

The UCU has already threatened industrial action if changes are forced through against its wishes.

Michael MacNeil, the UCU's head of higher education, said: "Mr Willetts' comments are very disappointing and at best ill-informed."

The UCU had argued for cost-sharing and higher member contributions in a "pragmatic response", he said, adding that the employers' proposals "are aggressive, unnecessary and are always based on the worst-case scenarios".

The USS has assets worth nearly £30 billion and about 130,000 active members.


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