You have until 17 January to complete your personal USS consultation responses, and we strongly recommend that you do: The University of Leeds has the fifth largest population of USS members within the current dispute, and a volume of responses could be very significant. The consultation is a legal requirement on the part of the USS scheme, but you might have a sense of how seriously they take it by the fact that they are going ahead with the changes before the consultation closes. In this light, it is all the more important that as many of you as possible submit your response to the consultation.
You can submit your responses via: www.ussconsultation2021.co.uk. You will need your USS member number and your National Insurance number to log in.
Once you have logged in, you can play with the USS modeller to calculate your own personal loss in retirement from the proposed changes. We have discovered that the USS modeller has predicted even greater losses for you than the UCU’s own modeller, and certainly much higher than the UUK (and our own University) have disingenuously tried to indicate might occur. The key data here is the value of your pension. Look at how much less this will be after these cuts, and multiply that amount by the number of years you expect to enjoy retirement. Then go to the bottom of the modeller page and adjust the CPI inflation figure. You might want to use today’s inflation rate of 5.1%. Then go back up the page and see what this does to your proposed pension changes compared to current benefits.
We know that in the last USS consultation with members, the USS disregarded responses that were repeated and clearly cut and pasted from templates. For that reason, we are not suggesting a fixed set of replies. However, what follows is a summary of the questions, some clarifications in square brackets, and some italicised thoughts for you to reflect upon in formulating your responses. We have been informed by Sam Marsh’s thoughts for this.
Question 1: “It is proposed that the salary threshold will reduce from £59,883.65 to £40,000 from 1 April 2022, meaning your Retirement Income Builder (that is, the defined benefit section of the Scheme) benefits will be based on your salary up to that level for the 2022/23 year. The Salary Threshold would continue to be increased annually in line with inflation but capped at 2.5% CPI in any year.”
[Two impacts here: a. the guaranteed part of your pension is being reduced if you earn above £40k and b. If inflation goes above 2.5% this has an effect here of restricting the increase of the Salary Threshold, meaning more people could be caught by it, depending on future salary growth. CPI inflation is currently 5.1% and RPI is 7.1%]
Thoughts for your response: You might note something about how this change removes parts of the guaranteed pension of many more people than the current threshold effects. There might be something about intergenerational unfairness here. In relation to the 2.5% cap, you might note that CPI stands at 5.1%, and that predictions are for no less than 4% in 2022.
Question 2. “It is proposed that the rate at which benefits are built up in the USS Retirement Income Builder (that is, the defined benefit section of the Scheme) will reduce – currently members get 1/75th of salary (up to the Salary Threshold) in DB pension each year (and 3/75ths as a lump sum) but it is proposed to change to 1/85th (and 3/85ths) respectively.”
[This is about the amount of pension that your contributions ‘buy’ each year. Multiply your gross salary by 1/75 and then by 1/85: this is the amount of annual pension that your salary buys in one year of active service, and the difference in your two calculations is how much that is reduced by. That amount then is added to all other such amounts from each year of service, and these increase in the background in relation to inflation (see question 3), until you retire and draw upon them added together as an income. The 3/75ths and 3/85ths calculation relate to the lump sum you can get at the point of retirement in addition to that ongoing income.]
Thoughts for your response: As Sam marsh says, if you consider the cuts to be based on a distorted valuation, conducted at the worst point in the recent pandemic, then do say so. If you believe the valuation suffers from extreme levels of prudence, then say so. If you believe that the cuts are unjustified by this unwarranted valuation process, say so.
Question 3. “JNC recommended changes – inflation cap. It is proposed that the increases (before and after retirement) to your benefits built up after 1 April 2022 to protect them against inflation will be capped at 2.5% in any year.”
[The pension that you earn with each year of salary increases in the background in relation to inflation, like interest in the bank. The proposal here would stop that pension growing in line with inflation if inflation goes above 2.5% (It is currently 5.1%). This would have a very significant impact on the value of your pension in retirement as it would not have grown to match the growth in the cost of living.]
Thoughts for your response: These changes fortunately do not impact on pension that has been put aside from salary up to the point of the changes, which will continue to grow with inflation. This however means that an intergenerational unfairness is hard-baked into these changes, and the younger you are the more your pension will be negatively impacted by inflation over 2.5%. Again, if you consider the cuts to be based on a distorted valuation, conducted at the worst point in the recent pandemic, then do say so. If you believe the valuation suffers from extreme levels of prudence, then say so. If you believe that the cuts are unjustified by this unwarranted valuation process, say so. You might wish to point out that the JNC ‘recommendations’ were not the result of an agreement at JNC, but rather by the casting vote of the chair after UCU’s costed proposals were ruled off the table by UUK’s behaviour.
Question 4. “JNC recommended changes – [You] will continue to contribute 9.8% of your total salary to USS (the rate which applies from 1 October 2021); your employer will continue to pay 21.4% of your total salary. Note, if your salary is higher than the Salary Threshold (which is proposed to be £40,000 from 1 April 2022) then, as now, 8% from your contributions on your salary above the Salary Threshold (and 12% from your employer’s contributions on your Salary above the Salary Threshold) will be paid into your fund in the USS Investment Builder (that is, the defined contribution section of the Scheme) section. What are your views on this?”
Thoughts for your response: This implies a reduction in the value of defined benefits and no increase in the value of defined contribution – your pension shrinks. This allows the employers to sit on a profit as they hold on to the amounts already set aside to pay any expected increase in contributions this year, but staff continue to pay the same for reduced benefit. You might wish to point out that no valuation prepared at a sensible date would necessitate these changes. Again, you might wish to point out that the JNC ‘recommendations’ were not the result of an agreement at JNC, but rather by the casting vote of the chair after UCU’s costed proposals were ruled off the table by UUK’s behaviour.
Question 5. “Of the following changes, please state the order of your preferred approach to addressing the increased cost of benefits? A. Reduction in the Salary Threshold used to calculate defined benefits (from £59,883.65) B. Reduction in the future accrual rate used to calculate defined benefits (from 1/75ths) C. Introduction of a 2.5% cap on increases to pensions built up from 1 April 2022 D. Contribution increases (from a total of 31.2% of salary; 9.8% of salary paid by members and 21.4% of salary paid by employers) E. Any other benefit adjustment (please specify).
Thoughts for your response: You might wish to indicate that you would propose E, which might involve a new valuation at a sensible date, for example 31 March 2021, and necessitating no change to benefit structures. You might indicate that all other options are undesirable equally.
Question 6. “Fallback position – If the JNC finds it cannot make a final recommendation on benefit and contribution rate changes before 28 February 2022 (in the form of consent to an executed deed of amendment) the current benefit structure would remain in place and member and employer contribution rates would instead increase. Under this fall-back proposal the rates would increase in steps every six months starting at 11% in April 2022 and rising until October 2025 where they would reach 18.8% for members and 38.2% for employers. This would remain the case unless and until an alternative benefit specification is proposed and agreed, or a subsequent valuation is undertaken and concluded which would reflect the economic, funding and covenant positions at the time of that valuation.”
Thoughts for your response: You might simply point out that this could be avoided if the UUK consent to the current terms being suggested by the UCU. Or, as Sam Marsh points out, if you think that maintaining current benefits is the top priority (even if that means paying 11% from April-October while a new valuation is undertaken), then do say so.
Question 7. “Your opportunity to provide further insight. This question is not a formal consultation question – it doesn’t relate directly to the proposed changes to benefits or contributions from 1 April 2022. However, it’s a chance for you to provide your views in some related areas and maybe help contribute to the development of specific options in the scheme in the future. USS provides valuable pension benefits to members in return for a specific contribution rate. These benefits are valuable but around 15% of employees who are eligible choose not to be a member of USS – many citing concerns around affordability or portability of their benefits. Employers, following the recommendation of the Joint Expert Panel, are considering whether there should be more choice and flexibility for USS members. This could be, for example, the ability for the member to choose to pay lower contributions and build up a reduced amount of pension. What are your views on the introduction of choice and would any particular flexibility be attractive to you?”
Thoughts for your response: You might wish to welcome choice and flexibility, but note that these should not cause intergenerational unfairness.
Question 8. “Any final comments or views?”
Thoughts for your response: You may wish to note that the USS are implementing these changes before receiving the responses from you and other members via this consultation. You may wish to query therefore what the impact of the consultation might be on those changes. You might wish to query whether USS are in breach of the scheme rules in how they have conducted the valuation process (see this thread). As Sam Marsh says: If you consider the directors of the scheme to have acted contrary to your best interests, whether of the valuation date, the lack of control of scheme costs, the lack of divestment, or the equalities considerations of the proposed cuts, then say so. And if you are prepared to strike to ensure that the cuts are revoked, and a new valuation is demanded by employers, then do say so.
N.B. These changes will only affect future pension accrual. What you have already accrued will continue to grow in relation to the terms that it was earned under. This is another example of intergenerational unfairness as they impact on younger members more than older members.
This post is from an email to members from Mark Taylor-Batty, the branch committee’s lead rep on pensions, sent 16 December 2021