The USS announced it wants to increase combined contributions required from staff and employers to cover its projected deficits
University staff and employers have come together to condemn an “unrealistic” increase in contributions demanded by the main higher education pension scheme, which would cost many employees nearly £8,000 annually and a further combined £1bn from employers.
The Universities Superannuation Scheme (USS), which is the major staff pension fund for many British universities and academic institutions, announced it wants to increase combined contributions required from staff and employers from 30.7% of payroll to as much as 56%, to cover its projected deficits.
The move sent tremors through the academic community, where the pension administered by USS has prompted major strikes over the last three years, including industrial action during 2019-20 that was curtailed by the pandemic.
Jo Grady, the general secretary of the University and College Union, said the USS’s trustees were being “overly pessimistic” and called on employers represented by Universities UK to put pressure on them to revise their valuation.
USS is trying to spin the fundamentally flawed assumptions which its valuation of the pension scheme relies on as objective matters of fact. In doing so it risks endangering a healthy scheme, Grady said. After a decade of pay and conditions being degraded, many precarious and low paid higher education workers can no longer afford to be USS members. Even more will quit if contribution rates go up further and this will endanger the health of the scheme as a whole.
The union plans to hold a conference to decide its next steps, with Grady warning it “cannot rule anything out”.
The demand for higher contributions appears to have been triggered in part by the decision of Trinity College to withdraw from the scheme entirely in 2019, prompting fears others could follow. This fear was described as “unrealistic” by insiders because few universities could afford to do so.
Kate Barker, the chair of the USS’s trustee board, said: Trends in financial markets have made the valuable pension promise offered by USS – a set inflation-linked income for life in retirement, regardless of what happens to the economy in future – much more expensive today than in the past.
The USS valuation would see contributions rise to 56% of payroll in a “worst case” scenario. Currently the joint contribution by employers and employees is 30.7%, with 9.6% paid by staff and the remainder by employers.
A spokesperson for Universities UK, which represents employers to the USS, said: The very high prices for current benefits put forward by the USS trustees are unaffordable for employers, risk pricing even more staff out of the scheme, and undervalue the collective and enduring financial strength of the participating employers.
Employers and scheme members need a stronger and clearer justification from the USS trustee for the very high pricing decisions. Without this justification, employers and scheme members will be concerned that the scheme is facing an unnecessary level of reform, the spokesperson said.
The USS administers the pension fund on behalf of more than 300 institutions including many universities, encompassing 400,000 active or retired staff, which makes it one of the UK’s largest pension funds.