Many UCU members will have pensions in the Universities Superannuation Scheme (USS) and will remember that back in 2014 the scheme was changed (against our wishes) to replace the final salary basis with a ‘career average’ one, and an element of ‘defined contribution’ for salaries over a certain threshold. This reduction in pension benefits was a consequence of how the USS pension pot was valued – a strange and self-contradictory methodology which produced a large apparent ‘deficit’. At that time UCU campaigned against this peculiar valuation and against the changes to our pensions, with limited effect, and eventually members voted against further industrial action and the changes were imposed. At the time, we were concerned that if the methodology wasn’t changed, the same would happen at the next 3-year valuation in 2017. Lo and behold, that’s where we are now.
Here’s the financial situation in a nutshell:
- Your pension scheme receives more money every year from members paying in than it spends in paying out pensions and costs.
- The current value of the scheme’s assets is £60.5 billion. The payouts last year were approximately 3% of that.
- The surplus is growing each year, and the investments have grown at a rate higher than the FTSE for the last decade.
- The liabilities (pension payments and costs) went down last year for the first time in twenty years.
- The ‘valuation’ is a calculation of x minus y, where x is the money that the scheme currently has (see 2 above) plus the future interest on this, and y is all the money that has to be paid in pensions to current and future pensioners. If this sum produces a negative amount, then this is called a ‘deficit’ because the money that is in the scheme now will not pay all current and future pensions if every university and every member stopped paying in at once. That scenario is extremely unlikely, but it forms the essential basis of the calculation.
- The calculation assumes that the assets of the scheme are almost wholly invested in low-interest vehicles such as government bonds. Interest rates are currently historically low, so low-interest means really low interest. In fact, most of the assets are invested in a diversified portfolio which generates a much higher rate of return. So this assumption is not based in fact. (For the mathematical, as interest rates tend to zero, the ‘deficit’ tends to infinity!)
Most university managements stood (blindly) by the valuation methodologies last time round – with some notable exceptions such as the London School of Economics. If they continue to do so, then the money being paid into the scheme will have to go up. At the moment, employers pay 18% of our salary and we pay 8%. USS are currently consulting universities for their views, and the response is likely to be that universities cannot afford to pay more, so we must pay more (6.6% more is the figure quoted) and/or have our pensions reduced. Remember, this is not to meet the actual costs of pension payments, but to meet the projected cost of paying back a fictional deficit that will never occur.
- The recent news about the very substantial pension pots, on top of their large salaries, that University vice-chancellors have enjoyed.
- The fact that USS benefits are already lower than those in the Teachers’ Pension Scheme (TPS) for UCU members in post-92 institutions.
Your union is currently consulting members, through an online ballot, to see if you are willing to take industrial action to defend pensions. Members should have received an email, on 19 or 20 September, entitled “Vote in the USS consultative e-ballot”. Leeds UCU committee recommends you vote YES to give UCU’s negotiators a strong hand in the forthcoming negotiations.
Some suggested reading for more about the USS ‘deficit’:
- Good clear blog post in the independent ‘Pension playpen’
- USS latest news on national UCU website
- The USS employer consultation document (helpfully posted online by Sheffield university) (PDF)
- The response from UCU advisers First Actuarial (PDF)
Leeds UCU is also organising a series of meetings across campus during the week beginning 2nd October, for members to come and discuss both the statutes dispute and the pensions situation. Check your email for details.
Note: some Leeds UCU members have reported UCU emails being automatically moved into the Clutter folder. We have asked IT without success to add UCU to the list of senders whose emails don’t get moved. You can turn Clutter off in the Outlook Web App by selecting Options > Mail > Automatic processing > Clutter and untick the ‘Separate items identified as clutter’ box.
This page was last updated on 27 September 2017