USS Pensions Consultation
As Vice-Chancellor of this great University, I have two major aspirations: that we can provide excellent conditions for our staff that engages them and makes them proud to work here; and that the University of Nottingham continues to flourish long after I am gone. Unfortunately, from time to time, these two aspirations are in tension with each other, and now is one of those times. The forthcoming national consultation on proposed changes to the USS pension scheme deserves all of our attention over the coming weeks. This is of huge importance for our staff and for the future of the University.
The USS is a national scheme, with almost 400,000 members, not a local one. Over the last few months, a Joint Negotiating Committee of employer (UUK) and staff (UCU) representatives has met on numerous occasions. A proposal is now on the table to move the scheme fully to a defined contribution model, with the possibility of moving back to defined benefits in the future if the pension deficit situation improves. Any benefits saved to date will not be affected. The consultation process starting on 19 March will allow the sector to test the credibility of the proposal for both the impact on staff in retirement and for the scheme’s sustainability.
Pensions are inevitably an emotive issue. They are also a highly technical issue, with actuaries disagreeing on the levels of deficit, with predictions about the future performance of investment schemes the subject of hot debate, all peppered with complex and sometimes unhelpful jargon. As a University, we want our staff to have access to as much objective information as possible so that they can fully participate in the consultation. To this end, we have asked independent actuaries from Mercer to visit the University and run a series of workshops to help demystify some of the jargon and ensure staff understand the proposed changes.
The University & College Union (UCU) disagrees with the proposal and in our University, alongside more than 60 others, some 50% of members have voted for industrial action. I stand by the rights of staff to peaceful protest, including industrial action, but if that happens, the University will need to ensure that we do what we can to minimise disruption to our students and other staff who do not wish to participate. This may create tensions in the University, but I have every confidence that our community will maintain a constructive and open conversation.
There will always be arguments about the numbers, but there is no doubt that the current scheme has an unsustainable deficit - £7.5 billion by its own projections. There have also been a number of high profile companies (BHS and Carillion being recent examples) going into receivership and being unable to meet the terms of their pension schemes. One could argue that the higher education sector is too big to fail, but the remit of the Office for Students implies an expectation that there will be some universities which become financially unsustainable in coming years. Any failures in the sector will put increased pressure on those of us that are left.
The University Executive Board has looked closely at arguments to increase both University and staff contributions in order to retain the scheme as it currently stands and cover the deficit. However, we are concerned that early career staff in particular would struggle to meet additional contributions, and that the University’s ability to invest in the student experience, maintaining our infrastructure, supporting research, and attracting, rewarding and retaining talented staff would all be significantly challenged by continuing to increase our contributions to cover the pension deficit.
This is a sector-wide pension scheme, which requires a sector-wide solution. No individual Vice-Chancellor will have influence over what is decided. While it would be very easy for me to say that we can just continue as we have been - increasing employer and employee contribution rates - it would simply not be honest of me to do that.
Whatever the outcome of this consultation, the University is committed to delivering its final recommendations. I would encourage all scheme members to participate in the consultation, and take advantage of the information sessions that will be provided by Mercer.
Further details are of the consultation proposal are published on the HR webpages and the Universities UK website. You can also book your place on the staff pension workshops with Mercer.
Professor Shearer West