Members of the USS pension will be aware of the debate surrounding its long-term affordability, and the Joint Negotiating Committee deliberations between UCU and UUK to determine how to provide good pensions that are sustainable and affordable for the long term.
USS members across the sector will be consulted for 60 days from 19 March 2018 on a proposal to move future pension benefits to a defined contribution scheme from 1 April 2019. Full details of the proposal, key facts and Q and A material are published at the Universities UK website; and we have provided a summary.
The University is committed to support staff with information and access to the consultation. Briefing sessions have been arranged in February with independent professional actuaries, Mercer, to help staff understand the proposed changes.
The current situation
The USS is currently a defined benefit scheme (for earnings up to £55,550) where members’ pension pots are built using payments made by staff and their employer, and pay a specific income on retirement, depending on how many years staff have worked for their employer and the salary they’ve earned. For earnings over £55,000, a defined contribution scheme applies.
Successive valuations of the USS in 2011, 2014 and 2017 have revealed a substantial and increasing deficit between the value of its assets, ie how much is available in the pension pot, and its liabilities, ie the cost of the pensions it will need to pay in future. This deficit has grown from £5.3 billion in 2014 to £7.5 billion in 2017.
To maintain the scheme as it is would be unaffordable for both staff and employers. USS projections show that current payments made into the scheme - 18% of salary by employers and 8% by staff - would need to reach a combined total of 37%, or an extra £22 million paid by the University and our staff each year.
There are no easy answers. Without the proposed changes, staff would pay more; universities would pay more; there would be less investment available for teaching and research; and USS would be forced to make riskier investments.
To put the figures into context, £22 million is more than the entire amount the University will generate this year for additional investment in our staff, our students, our research, and our teaching.
The consultation proposal
This is a sector-wide issue, and so the USS has been working in partnership with UUK (representing employers) and UCU (representing staff) in a Joint Negotiating Committee to agree how to continue to provide good pensions while being sustainable and affordable for the long term.
The USS will now consult all USS members on a proposal to move all future pension benefits to a defined contribution scheme from 1 April 2019. This already applies to earnings above £55,550.
A defined contribution scheme is where the pension pot is built using payments made by staff and their employer, invested (eg in stocks and shares) and the income at retirement depends on how well that investment has performed over time.
The consultation proposal would avoid any increase in pension costs for staff, commit universities to maintain their payments at 18%, and ensure that investment is not diverted from other core activities, such as teaching and research.
The University has supported the discussions at the Joint Negotiating Committee, and has a longstanding commitment to implement its recommendations. Every effort will be made to support staff with information and access to the consultation, which commences on 19 March 2018.
Staff pension workshops
The University has already arranged staff briefing workshops in February with professional actuaries, Mercer, to help staff understand how the changes may affect them. Please book a place.