Don’t be pound foolish over pensions

UK academics prize the USS pension. Sacrificing a scheme ‘in rude health’ on the basis of overcautious calculations would cause more disaffection

September 6, 2018
Maxwell with Mirror
Source: Getty

Academics who are not Oxford United fans may well feel that the late Robert Maxwell has a lot to answer for. During his chairmanship in the 1980s, the club rose meteorically, culminating in a Wembley triumph (albeit after a deeply unpopular merger attempt with local rivals Reading). But the wealth that underwrote that success came straight out of scholars’ pockets.

The Czech-born adventurer reportedly emerged from his time fighting for the British in the Second World War with one overriding passion: “to be a millionaire”. Asked by the government to shake up the UK’s sleepy scientific publishing system – considered unworthy of the country’s scientific prowess – Maxwell proceeded to pioneer the commercialisation and massification of the journal industry.

His Oxford-headquartered Pergamon Press launched journal after journal during the 1960s and 1970s. Noting that “scientists are not as price-conscious as other professionals, mainly because they are not spending their own money”, Maxwell also hiked prices remorselessly, and by the 1980s had become wealthy enough to buy not only Mirror Group newspapers and bankroll Oxford United but also Derby County (although he baulked at the asking price for Manchester United).

By 1991 – the year it was sold to Elsevier – Pergamon was reporting a 47 per cent profit margin, while librarians wept into their ledgers and academics gritted their teeth in the race to publish or perish.

Maxwell’s trailblazing offer of an efficient publishing service and a dedicated outlet for every fresh ramification of the scientific endeavour evidently served a market need. But academics’ and librarians’ ongoing tug-of-war with publishers over the cost of open access publishing – culminating in the recent termination of German and Swedish universities’ contracts with Elsevier (most recent profit margin: 36.8 per cent) – underlines how much universities continue to spend on publishing.

Pergamon ended up in Elsevier’s hands amid the collapse of Maxwell’s empire. The tycoon, who mysteriously drowned in the same year as the Pergamon sale, was later discovered to have plundered the Mirror Group’s pension scheme in an attempt to shore up his cash flow.

According to our cover feature, this act of larceny affected not only Mirror Group pensioners but, ultimately, virtually everyone in the UK’s private sector, too – including university staff.

No less an authority than Mervyn King, the former governor of the Bank of England, writing with economist and Financial Times columnist John Kay, argues that while the regulations introduced in the wake of the Maxwell fiasco have secured company pension schemes against executive raids and corporate collapse, they have also made final-salary pension schemes prohibitively expensive to sustain. Hence, such perks have been gradually replaced by defined-contribution schemes, whose payout levels depend on market performance. One of the few defined-benefit schemes still remaining outside the public sector – and the largest – is the Universities Superannuation Scheme.

All of which brings us to this spring’s strike over plans to switch the USS from paying out on the basis of career-average salaries (the final-salary scheme closed to new members in 2011 and to everyone in 2016) to a defined-contribution scheme. Such was the scale and length of the strike that universities were forced to suspend the proposal and establish a review to assess the valuation of the USS and investigate how to maintain defined benefits. That review is due to report this month.

The changes were proposed on the ground that the USS has a deficit of £7.5 billion. But in King and Kay’s view, the scheme is fundamentally “in rude health”. The problem is that the post-Maxwell regulations are excessively focused on guaranteeing the pensions of baby boomers, outlawing risk sharing between the generations.

It would be too glib to conclude that industrial relations in UK higher education wouldn’t be under such strain if universities weren’t spending so much on the journals Maxwell founded. It is also worth noting that not everyone agrees that a defined-contribution scheme would necessarily pay out less to younger academics. But in an era of below-inflation pay rises, in which academics are under huge pressure to publish in top journals while also attaining high student satisfaction ratings, it is inevitable that any perceived threat to the promised pot of gold at the end of the rainbow will provoke howls of protest.

Few academics expect to end their days on a yacht in the Canary Islands, as Robert Maxwell did. But hope for the future, in political, cultural and environmental terms, is already in low supply. Sector leaders’ scope to change course on pensions may be limited, but they must do everything they possibly can to avoid taking further wind out of academics’ sails.


Print headline: Pound foolish

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