Why is pension reform necessary?
Universities Superannuation Scheme (USS), the main pension scheme for university staff, has reported a funding deficit of £14.1 billion as of 31 March 2020 (assuming that the JNC recommended reforms are implemented) and a higher figure of £18.4 billion should these changes not take place. It also faces significant increases in the cost of providing future defined benefits. The Pensions Regulator has expressed its concerns and is expecting changes to be made to address the situation.
What will the reforms mean for staff at the university?
The impact for staff in the scheme will vary according to their particular circumstances and other factors such as future investment returns and inflation. USS has provided a modeller on its website that will enable members where possible to assess their individual situation.
This modeller incorporates pension data held by USS, but there are some categories of membership where this is not possible and members will have to use the modeller to assess the impact of these changes without regard to their pension history. Further details are included on the consultation website.
What will employee contributions be if the new proposals are implemented?
If the new proposals are approved, your contribution rate will remain at 9.8% of your salary and stay at this rate at least until the next valuation has been concluded in about three years’ time.
If the new proposals are not approved, your contribution rate will initially increase to 11% of your salary from next April and continue to rise after that every six months in line with the decisions made by USS. For example, the October 2022 figure would be 12.9%, and by October 2025 would be 18.8% under the alternative cost basis to support current benefits.
What will the university’s contribution to the pension scheme be?
For the University, under the new proposals, our contribution rate will remain at 21.4%.
If the new proposals are not approved however, our contribution rate will increase to 23.7% from next April, and then carry on increasing every six months up to 38.2% in October 2025.
Assuming no significant changes to our overall payroll, each 1% increase to the employer contribution means £2.2m per annum extra for the University to find. This will mean less money is available to support our core activities.
Is there an alternative to this proposal?
This proposed package has come at the end of 18 months of negotiations between USS, UCU and UUK and all other options have been exhausted. At the moment, there is no alternative proposal on the table.
What are the next steps in implementing this proposal?
The 2020 valuation has now been formally signed off by the USS Board, and we are currently progressing through the formal stages of an employer consultation with affected staff and representative bodies. The 60-day consultation with members started in early November 2021 and is due to end on 17 January 2022.
If the UCU successfully ballots for strike action, what will happen?
This is a matter for UCU, but previous industrial action has resulted in strikes which have meant classes being cancelled and exams disrupted over a period of many months. The number of votes cast at Warwick in the November 2021 UCU ballot did not meet the minimum 50% threshold for action. UCU are re-balloting members in December 2021.