Universities UK response to UCU strike ballots: ‘students do not deserve further disruption’

Universities UK (UUK) has responded to comments made by University and College Union (UCU) General Secretary Dr Jo Grady, as industrial action ballots over USS pensions open at universities across the country.

Speaking on behalf of USS employers, a Universities UK spokesperson said:

“We are disappointed UCU is pressing ahead with an industrial action ballot over USS pensions. The proposed reforms secure USS’ status as one of the most attractive pension schemes in the country, and eliminate the need for massive contribution rises that would severely reduce pay and force employers to make cutbacks in other budgets.

“Discussions over the valuation are still ongoing. Employers met with UCU representatives last Tuesday (12 October), and further meetings are planned for the coming weeks. However, it is hard to see how UCU’s demands can be reconciled without an alternative solution, which we have consistently asked them for and are willing to consult employers on.

“After a difficult 18 months, students do not deserve any further disruption. It is unclear why UCU thinks it’s appropriate for students to suffer due to the scheme’s increased costs and the regulatory constraints under which pensions operate in the UK.

“Workplace pensions are extremely important and UCU’s misleading use of a 35% reduction may lead staff to make life changing decisions and opt out of USS, missing out on an employer contribution of 21.4% towards their retirement. In fact, last week the USS Trustee published modelling which shows that for university staff on a range of salary levels, the annual pension reduction would be between 10 and 18%; not 35%, which UCU has calculated without taking into account the defined contributions element of the scheme. If no changes are made, USS will implement unaffordable contribution rises from April 2022, escalating every six months and reaching 18.8% for members and 38.2% for employers by 2025.

“Universities are well prepared to mitigate the impact of any industrial action on students’ learning, and minimise disruption for those staff choosing not to take part.”

Notes to editors

1. Universities Superannuation Scheme (USS) is one of the largest private pension schemes in the UK and is the principal scheme for academic and comparable staff in UK universities and other higher education and research institutions. Universities UK represents the views of 340 higher education employers on USS.
2. Universities UK Chief Executive Alistair Jarvis has written in response to a letter from Dr Jo Grady, 18 October 2021: http://www.ussemployers.org.uk/sites/default/files/field/attachemnt/2021...
3. The Pensions and Lifetime Savings Association (PLSA) recently updated its estimates for the amount of pension required in retirement for various standards of living, with £10,900 being the minimum required per year for a single person. Under the proposed reforms, a USS scheme member earning £30,000 per annum who has already been in the scheme for 3 years is estimated to receive £14,550 each year in retirement – £23,900 if a full state pension is included. A scheme member earning £70,000 per annum who has already been in the scheme for 18 years is estimated to receive £27,600 each year in retirement – £36,950 if a full state pension is included.
4. To secure the guaranteed ‘defined benefits’ section of the scheme (a key aim of UCU), employers agreed to give unprecedented financial backing to the scheme, known as ‘covenant support’, worth an additional £1.3 billion per year. Defined benefits schemes are increasingly rare in the UK, with the vast majority having already closed to due increasing costs.
5. This is in on top of the proposed employer contribution rate of 21.4% of salary, which is over two and half times the average non-matched employer pension contribution in FTSE 100 companies (8.3% of salary), based on the FTSE 350 DC Pension Scheme Survey.
6.  UUK wrote to UCU on 7 September 2021 to clarify whether to clarify UCU’s proposals for the 2020 valuation should be considered formal, so that employers can be consulted. To date UUK has received no reply to the letter.
7. The USS Trustee has confirmed that should reforms be blocked, members and employers will face escalating contribution rates starting in April 2022 and rising every six months until 2025 – rapidly reaching unaffordable levels that would undoubtedly lead to mass member opt-outs and employer insolvency.
8. Employers want to urgently progress longer-term reforms to the scheme to address the scheme’s high opt-out rate, by developing a lower-cost option for staff, progressing a thorough governance review, and exploring alternative scheme designs (including conditional indexation).
9. Conditional Indexation (CI) involves annual increases to pension benefits – above any statutory minimum increases – may be dependent on scheme investment returns and not guaranteed. (This may be considered, for future benefits, by stakeholders after the 2020 valuation.)
10. Around 20% of members are currently choosing not to join the scheme and losing out on the 21.4% employer contribution, leaving them without any pension savings for their future.
11. The USS Trustee has stated that a 2021 valuation would make no material difference to the required contribution rate and while the deficit would be smaller due to recent market improvements, the cost of future service would in fact be higher. The Pensions Regulator has provided its views on this matter (and note it is the USS Trustee that has the power to decide whether to carry out a valuation).