Notice of statutory consultation by employers in relation to Universities Superannuation Scheme (USS)
Email to all members from branch pensions officer Mark Taylor-Batty, 28 October 2021
This morning many of you will have received the formal written notice of a statutory consultation in relation to USS. It contains details about proposed changes to your USS pension, most of which would take effect from 1 April 2022, if implemented. These are the changes that UUK presented and were pushed through the JNC in August, bringing negotiations to an end and thereby instigating a ballot for industrial action. UCU are now asking you to decide whether you accept a loss of income in retirement of potentially tens of thousands of pounds (and the younger you are the more you will lose) or whether you will stand with your union colleagues by voting ‘yes/yes’ in the ballot to do all we can to improve that situation. We will address the details of this consultation in an email next week.
In this email I want to outline some of the impacts of the changes to your pension, and address some of the things stated in the presentation for the University by USS’s partners and advisors Mercer’s.
The representative of USS’s advisors in that presentation yesterday stated that the UCU’s proposals had not been tabled at the JNC, but did not give the detail of how UUK had blocked UCU’s ability to table those proposals. The UCU proposals were on the agenda, and had been fully costed by USS and were viable. But, in order to be formally tabled, they relied on the UUK applying the same covenant supporting measures that they were offering for their own proposals. UUK refused this, and therefore obliged UCU to remove the proposal from the discussion. As such, it is now questionable simply to state that ‘the UCU did not formally table any proposals’ without offering that context. Please note also that the UCU’s proposals, unlike the UUK’s, were a starting point to moving to a much better position with a new valuation. Unlike the UUK’s, these also involved better intergenerational opportunities. If you would like to see the full details of the UCU proposal you can read it here, and see how this compared with the UUK’s in this WONKHE article.
These old UCU proposals are not part of our demands now, as there have been significant developments since then, not least the Dual Schedule of Contributions that USS has filed to the regulator, which means that in the case that UUK revoke their cuts before the end of February, contributions for current benefits would go no higher than 11% for members until October 2022, giving more time for a solution built around an updated valuation, and obviating the ‘fall-back’ position and associated numbers that were circulated this morning.
The Mercer’s talk seemed to indicate that the Pensions regulator had required a March 2020 valuation. While there is a requirement to provide a valuation of a DB pension every three years, if anything tPR had discouraged a March 2020 valuation, and certainly did not insist on that as the valuation date. USS is the only UK DB pension scheme to insist on a valuation set at the onset of the pandemic. See more here. You may wish to know that the current value of the assets of the scheme stands at around £90bn, which is more than £20bn higher than the 2020 valuation assumed they would be now when calculating a ‘deficit’ of around £15bn. Here are some of the details of the changes to your pension that are proposed by UUK, and what they might mean for you.
Summary of the UUK’s recommended changes (see here for an A-Z of pension jargon)
- From 1 April 2022, each year members will build up a pension in the USS Retirement Income Builder, the defined benefit section of USS, at a lower rate of 1/85 of salary compared to the current 1/75 of salary, and a separate lump sum of 3/85 rather than 3/75, up to the Salary Threshold. This means that you will have a smaller defined benefit pension in retirement, because each year you will put aside a smaller proportion of your salary toward that pension.
- From 1 April 2022, the Salary Threshold will reduce from £59,883.65 to £40,000. This means that any money you do set aside for a defined benefit pension is capped, and that if you earn over £40k, you will contribute additionally to a defined contribution pension with salary above that point, with an unknown pension outcome.
- From 1 April 2023, the Salary Threshold will continue to increase annually in line with official pensions, which are currently increased in line with the Consumer Prices Index (CPI), but subject to a lower maximum increase of 2.5% a year until 31 March 2025 or if earlier, the date of any change concluded by a review by the JNC of the amount of the Salary Threshold. This means that the 1/80th of your salary set aside with grow in line with CPI inflation in the background, but if inflation goes over 2.5% (as indeed it is now, and predicted to go to 4% next year) your pension savings will not rise in the background to keep up with costs of living.
- Benefits earned in the USS Retirement Income Builder from 1 April 2022 will continue to see increases applied annually before and after members retire, but subject to a lower maximum of 2.5% a year. Ditto.
From 1 April 2022, there will be a change of benefits for those who are members of USS for a short period (more than three months but less than two years).
What to do next
- Read more about the proposals and our dispute on the UCU website here: https://www.ucu.org.uk/strikeforuss
- Use the modelling tools to understand how the changes could impact you. (See opposite for a graph that indicates what impact the cuts would have on someone aged 40 earning £40k).
- Vote yes/yes in our ballot. If you have not received your ballot papers, today is the last day you can order a replacement – do so here.
Participate in the formal consultation, perhaps after considering the guidance we will issue.
From email to all members from branch pensions officer Mark Taylor-Batty, 28 October 2021
This page was last updated on 30 October 2021