A letter establishing a trade dispute over USS pensions has been sent today (7 June 2019) to every institution the scheme covers, including University of Leeds, as called for by UCU branches at the UCU Higher Education Sector Conference on Sunday 26 May (motion L5 (amended)).
The letter gives universities until 19 June to inform UCU that they will not be imposing any pension benefit cuts or increasing our pension contributions. The UCU’s position of ‘no detriment’ is based on there being no genuine need for any detriment, as the joint expert panel set up by the employers and the union confirmed.
We’d recommend all members read the full text of the letter below. (For more details about the dispute see our pensions page.)
Dear Vice Chancellor
You will be
aware that early last year UCU members took part in 14 days of industrial
action, which resulted in UUK withdrawing proposals to change USS from a hybrid
defined benefit pension scheme into a defined contribution pension scheme.
later voted to suspend the action and set up the Joint Expert Panel (JEP) in
response to an offer from UUK.
reported in September 2018 and made a number of recommendations for the conclusion
of the 2017 valuation. If implemented, these recommendations would also replace
the Rule 76 contribution increases relating to the 2017 valuation which were
triggered by USS while the JEP was still producing its report. The Rule 76
increases are being implemented in three instalments, from April 2019 until
April 2020, when combined contributions would rise to 35.6%. The Rule 76
changes are based on the retention of the current levels of pension benefits,
minus the 1% match, which has already been removed.
Both UCU and UUK welcomed the JEP report as the basis for
negotiations. Initially, if applied to the 2017 valuation, the JEP’s proposals
would have entailed a combined contribution level of 29.2% with no changes to
pension benefits. However subsequent modelling by USS, based on changed market
circumstances, showed that implementing the JEP in full would actually result
in combined contributions no higher than 26%, or 8% for members.
has not accepted some of the key recommendations in the JEP report. Instead, it
has proposed replacing the 2017 Rule 76 increases with a new 2018 valuation
that still involves contribution rates far above 26%.
insistence on higher contributions is partly based on external pressure from
The Pensions Regulator (TPR). TPR has expressed views on the levels of risk and
the strength of the employers’ covenant, and USS has accepted these views
rather than seeking to challenge them. This is despite the fact that both UCU
and UUK’s professional actuarial advisers consider a valuation based on the JEP
to be compliant with regulations, and despite the fact that the JEP has heavily
criticised TPR’s role in the valuation process. However, USS has not worked to
put the case for the JEP to TPR.
Instead, after months of drawn-out
negotiations and unexplained delays, USS has given employers three
options for finalising the 2018 valuation. The three options do not involve
changes to pension benefits. However, all involve higher rates than would be
the case if USS adopted the JEP’s recommendations.
The three options are now subject to a further UUK
consultation and I consider each in turn:
Option 1: contributions of 33.7% (23% for employers and 10.7% for
employees), to apply from April 2020;
Option 2: contributions
of 29.7% – but with a mechanism for contingent contributions of three 2%
increases (an additional 6%), split 65:35 between employers and members, to be
added to starting contributions of 20.4% and 9.3% respectively; and
Option 3: contributions of 30.7%(21.1% for employers and 9.6% for employees) to apply from October 2019,
with another valuation in 2020. Should no agreement on the contribution rate
from the 2020 valuation be implemented before October 2021, the contribution
rate would rise to 34.7% in October 2021.
UCU has a
clear policy position of ‘No Detriment’ established by the union’s conferences.
This policy means no increases in contributions and no cuts to pension
benefits. Unlike a 2018 valuation informed by the JEP’s recommendations, all
three of USS’s proposed options fail the test of ‘No Detriment’.
Members waited for the JEP
report to be issued and implemented, while USS went ahead and scheduled massive
contribution increases based on its controversial 2017 valuation. The JEP
report called that valuation’s integrity into question. Other developments have
made USS’s position even more questionable. These include Sam Marsh and First
Actuarial’ s demonstrations that USS has not properly justified its
‘de-risking’ strategy; USS’s misrepresentation of the Regulator’s methods for
evaluating risk; and the extraordinary recent accusation by statistician and
USS Trustee board member, Professor Jane Hutton, that she has been denied
access to important information and that the deficit may have been
Members have trusted
employers to work to replace the 2017 increases with a fair outcome, but it has
become clear that they will not do so. Employers have a lot of influence over
the valuation process, but they have allowed USS to dismiss the JEP’s most
important recommendations, they have not pressed USS to engage properly with
the Regulator, and, when other developments have called USS’s position into question,
they have taken USS’s side.
running out of patience. At the UCU HE Sector Conference on 26 May 2019,
delegates voted overwhelmingly to commence a dispute with USS employers and to
move to a statutory ballot for industrial action in September.
I am now
writing to seek your confirmation on behalf of your Institution that you will
not impose any benefit cuts and/or contribution increases, including contingent
contributions and default contribution rates for future valuations, on members
from October 2019 onwards. This includes any and all increases over the rate of
26% (8% for members) which was established prior to the 2017 valuation. You
must instruct your representatives on the Employers’ Pension Forum (EPF) and
the UUK nominees on the JNC not to introduce, comply with, or vote for any
proposals that would involve such cuts and/or increases for members; and,
failing that, you must cover any scheduled increases in full until USS’s governance and valuation methods
and assumptions have been overhauled.
If I do not
have your affirmative response by 19 June 2019, UCU will consider a trade
dispute to exist between your Institution and your employees/our members
regarding this matter.
possible to avoid a damaging dispute and strike action in the autumn of 2019,
and potentially thereafter in 2020. All you need to do is commit to uphold the
level of contributions no higher than 26% (8% for members). You also agree to instruct your
representatives on the Employers’ Pension Forum (EPF) and the UUK nominees on
the JNC not to introduce, comply with, or vote for any proposals that would
involve such cuts and/or increases for members; and, failing that, you
must cover any increases in full that are needed to maintain current benefits
until USS’s governance and valuation methods and assumptions have been
forward to hearing from you no later than 19 June 2019 with your affirmative
response as set out above.
UCU Head of Higher Education