Better USS pensions may be possible – but not just yet, say v-cs

Pension contributions could be cut or benefits increased if the Universities Superannuation Scheme’s finances continue to recover strongly post-pandemic, according to UK vice-chancellors.

New figures released by USS estimate that assets have increased in value from £66.5 billion when the scheme was last valued at the end of March 2020, to £88.8 billion at the end of last month. During the same period the estimated deficit has decreased from £14.1 billion to £2 billion, meaning that the level of contributions required to service the fund’s deficit has fallen to 0 per cent.

The monitoring report was released the day before changes to the scheme come into place that will cut thousands of pounds annually from employees’ guaranteed retirement benefits.

The University and College Union (UCU) said the “drastic improvement” in USS finances means the cuts should be “urgently revoked”.

Responding to the latest projections, UUK signalled further changes could be possible if the healthy financial picture remains constant but cautioned that the markets are “volatile”.

A statement released by UUK said that, without the latest reforms, “we would not have seen such an improvement in the funding position, which remains very volatile month-to-month”.

“The USS trustee has also indicated that the required rate for previous benefits would likely be in excess of 40 per cent of salary – even with the same level of covenant support employers have pledged under the package of reforms,” the statement added.

But UUK said that if “conditions seen in the last month prevail at the next valuation, it may be possible to reduce contributions or increase benefits or some combination of both”. The organisation said it remained “open-minded” about when the next valuation would be conducted.

UCU – whose members are staging further strike action opposing the pension cuts this week – have criticised the timing of the last valuation, which took place just as markets were crashing because of the pandemic.

Before the package of cuts was agreed at the February joint negotiating committee, the union called for the vote to be delayed so a new valuation could take place that would take into account improvements to the scheme’s finances.

The union has written to UUK’s chief executive and its negotiators and is urging its members to write to vice-chancellors to revoke the cuts.

Members are currently being balloted on whether to take further industrial action over the pensions cuts, which could include a marking and assessment boycott.

“University staff have known all along that these pension cuts are unjust, unnecessary and premised on a deeply flawed valuation conducted in the middle of the pandemic. Today they have been vindicated,” UCU general secretary Jo Grady said.

“The strong performance of the pension scheme has seen its assets reach unprecedented levels with growth now outstripping liabilities,” she said. “Vice-chancellors must now seize the moment, revoke these cuts and end the industrial strife which has so far seen universities hit by up to 18 days of strike action. A failure to do so will put rocket boosters on to our campaign to get the vote during the final week of industrial ballots.” 

tom.williams@timeshighereducation.com