03 March 2021

Universities could face threat of strikes over rise in pension contributions

03 March 2021

Universities could face the threat of a fresh wave of strikes over proposed “unaffordable” increases to their pension contributions.

More university staff could be priced out of their pension scheme amid changes being put forward by the Universities Superannuation Scheme (USS), vice-chancellors and union leaders have warned.

The USS has suggested that contributions will need to rise from 30.7% of payroll to up to 56.2% in light of low interest rates and reduced expectations of future investment returns.

The University and College Union (UCU) has said it will reach out to its higher education branches to decide their next steps, but the union’s leader said they “cannot rule anything out”.

It comes after strike action was held at universities across the UK in February and March last year, as well as in November and December in 2019, amid ongoing rows over staff pay, conditions and pensions.

UCU will be holding a special sector conference for higher education branches to decide our next steps and cannot rule anything out

In its middle scenario, the USS has said that the overall pension contribution rate would need to rise to 49.6% of payroll.

It is already due to rise from 30.7% to 34.7% later this year.

Even in the most favourable scenario considered by the USS – which would require further financial commitments from employers – the contribution rate would need to rise to 42.1% of payroll, the report suggests.

But without any such commitments from employers, the overall contribution cost would need to rise to 56.2%, according to projections by the USS.

Universities UK (UUK) has called the proposed increases “unaffordable” and it has warned that the rises could risk pricing more staff out of the scheme.

Meanwhile, the UCU has said the health of the pension scheme could be endangered by more staff opting out if contribution rates increase again.

Dame Kate Barker, chair of the USS trustee board, said: “We fully recognise the scale of the challenge facing the scheme and sympathise with our employers and members in light of the difficult decisions that lie ahead.

“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 very high prices for current benefits put forward by the USS Trustee 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

The USS report will now go to the Joint Negotiating Committee, which is made up of representatives from UUK and UCU, who will decide on any changes to contribution rates or benefits that may be needed.

Bill Galvin, chief executive of USS, acknowledged the challenges will not be “very attractive” to stakeholders in the Joint Negotiating Committee and it will be “very difficult”.

Addressing a media briefing on Wednesday, Mr Galvin said: “We are somewhat dismayed by the fact that we have to hand over a) such an uncertain platform (and) b) that the challenges are so substantive.”

A UUK spokesperson, on behalf of 340 USS employers, said: “The very high prices for current benefits put forward by the USS Trustee 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 understand that the USS has a sizeable deficit and that a high number of staff on lower grades opt out because the contributions are too expensive for them. It is important that USS is designed so that people in early career can also access an affordable pension.

“This means it is vital that contributions to the scheme are affordable and sustainable for staff and employers alike and that reform is necessary.

“However, 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.”

UCU general secretary Jo 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. USS and employers must do better.”

She added: “UCU will be holding a special sector conference for higher education branches to decide our next steps and cannot rule anything out.”

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