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Employers force through plans to cut university retirement benefits

31 August 2021 | last updated: 3 September 2021

UCU says industrial action in universities is now 'inevitable' after employer body Universities UK (UUK) voted to push ahead with its proposals to cut thousands of pounds from the retirement benefits of university staff.

At a meeting of the Universities Superannuation Scheme's (USS) Joint Negotiating Committee (JNC) employers voted for its package of cuts ahead of considering alternative UCU proposals and calls from the union for a month-long extension to negotiations to allow both employers and pension members to be consulted.

UCU's proposals would have delivered higher benefits in return for lower contributions than those put forward by employers. For the first time, they would have provided a secure pension for staff on low pay and insecure contracts who are currently priced out of the scheme. The proposals were intended to be a fair and short-term resolution to the flawed USS scheme valuation, which was carried out at the start of the pandemic when markets were crashing.

However, employers repeatedly refused to agree to a small increase in their own contributions. They also refused to provide the same level of employer 'covenant support' for UCU's alternative proposals as they were willing to provide for their own.

Now, with UUK's proposals voted through, those members who can afford to stay in USS will face significant cuts to their retirement income.

A typical member of the USS scheme on a £42k lecturer's salary, aged 37, will suffer a 35% loss to the guaranteed retirement benefits which they will build up over the rest of their career.

UCU says the employers' changes will threaten the viability of the scheme, with more and more staff likely to decide to leave the scheme in the face of cuts to benefits and increases in contributions.

In June, delegates to UCU's annual Congress voted to ballot for industrial action if employers did not rethink their proposals. The union has today emailed over 50,000 members in USS institutions calling them to a mass member meeting, where the union will outline what next steps will be, and how they should start to prepare for balloting and strike action.

The union says the only realistic way to avoid strike action at this late stage is for employers to carry out a rapid consultation on covenant support and the UCU proposals.

UCU general secretary Jo Grady, said:

'Employers represented by Universities UK (UUK) have today voted to implement a set of regressive USS pension proposals that will reduce member benefits, discourage low paid and insecurely employed staff from joining USS, and threaten the viability of the scheme as a whole.

'Employers have failed to support alternative compromise proposals put forward by UCU, drawn up under the constraints of a flawed 2020 valuation of the scheme. Disappointingly, UUK did not support calls from UCU for a new valuation, despite the overwhelming case for one, and refused to allow for time to consult universities on UCU's proposals, instead choosing to vote through their cuts.

'UCU's proposals were far superior to those of UUK, delivering higher benefits and reducing contributions for staff. They provided flexibility and for the first time in the scheme's history guaranteed benefits for the thousands of low-paid and insecurely employed staff who are currently priced out of joining USS. However, the proposals did not win the agreement of employers, who failed to commit to providing the same covenant support as they did for their own proposals.

'UCU's proposals would have provided a safe and equitable stop-gap solution until a new valuation is carried out, which should be at the earliest opportunity. Sadly employers have chosen to use a flawed valuation conducted at the start of the pandemic to rush through cuts to members' pensions. Unless employers allow for a rapid consultation on our proposals with a view to revoking their decision today, the path looks inevitably to lead to industrial action - and that is the responsibility of UUK.'

Under UUK's proposals:

  • Employers will pay 21.1% (the same as they do currently).
  • USS members will pay 9.6% (the same as they do currently).
  • Accrual will be reduced from 1/75 to 1/85.
  • The salary threshold up to which defined benefits are accrued will be lowered to £40,000.
  • Benefits will only be protected against inflation up to 2.5% (currently benefits receive full protection up to 5% and half protection against inflation between 5% and 15%).
  • There will be no flexible option for members who wish to join USS and earn a guaranteed pension.

Under UCU's proposals:

  • Employers would pay 24.9% (3.8% more than they do currently).
  • USS members would pay 8.1% (1.5% less than they do currently).
  • Accrual will be reduced from 1/75 to 1/80.
  • The salary threshold up to which defined benefits are accrued will be lowered to £40,000.
  • All benefits would receive the same protection against inflation as they do currently, via a system of trigger contributions payable by employers if inflation exceeds 2.5%.
  • Members would be able to choose to pay even lower contributions (0% or 4%) while receiving the same level of contributions from their employer and continuing to build up a guaranteed pension, at a proportionately lower accrual rate.
  • Members who spend less than two years (but over three months) in USS would be entitled to the same benefits as everyone else.

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