USS, the Universities Superannuation Scheme, is a final salary occupational pension scheme predominantly for academic and related staff in the pre-92 sector (sometimes known as the old universities). This means that benefits are calculated on the basis of your length of service and your salary close to retirement. More than 80% of those eligible to join are members of USS.
The rules of USS - including those defining member contributions and benefits - are determined by a Joint Negotiating Committee consisting of 50/50 UCU and employer representatives with an independent chair. The independent chair has a casting vote and, although it has never been exercised before now, this puts pressure on both sides to adopt a reasonable and rational approach to the resolution of pension problems. That is why UCU negotiators have tabled serious and considered proposals which will secure the future of our pension scheme for the foreseeable future. Regrettably, the employers have rejected this approach and are trying to increase your contributions and cut your benefits in ways which are wholly unreasonable, irrational and unacceptable.
USS is the second biggest occupational pension scheme in the UK and according to its website is 'one of the largest and most stable pension schemes in the UK'. in the tweleve months to March 2010, USS grew by £4.5bn during a significant eceonmic downturn in what was described as a "good investment performance" by the fund's managers. At its last valuation in 2008, the scheme was in surplus. It is also a 'cash-rich', 'immature' scheme. That means that the contributions paid in to the scheme exceed the cost of pension payments. The positive cash-flow is generally in excess of £800 million per year.
Does the fact that people are living longer endanger USS's financial health?
A:
It is true that there is a genuine issue with pension schemes in general as a result of longevity. There is an established, though sometimes overestimated, 'ageing effect' in most developed economies as a result of people living longer combined with a declining birth rate. In some pension funds, though not USS, this can mean that there are not enough staff working to help pay for the benefits of those who have retired. Unions in public sector pension schemes have recognised the potential future impact of this and have negotiated reforms in recent years to protect final salary schemes while also maintaining reasonable costs for employers and staff. This is what the UCU negotiators are trying to achieve.
Why did the union enter negotiations with the employers over USS in the first place?
A:
UCU entered negotiations with the employers on reforming the USS pension scheme because we wanted to ensure the long-term sustainability of the scheme. We recognise that pensions are 'deferred pay', and we must ensure that any reforms protect its value.
The union's expert advice confirms that this would produce significant short and long-term savings and would mean that the employers would not have to make any additional contributions following the valuation of the scheme in 2011. We believe that these are reasonable and equitable reforms that recognise the real pressures while defending the value of your deferred pay.
Unfortunately, the employers failed to grasp the opportunity to settle USS on a sound basis and have made a package of counter-proposals for the scheme.
What the employers are proposing is that in order to avoid paying higher contributions themselves in the future, the weight of funding the scheme will fall more heavily onto you, the employee. All members will pay more now.
Benefits for existing members would be protected but the employees contribution would go up. Meanwhile new starters, including existing staff not yet in the fund, would have inferior pension benefits, losing thousands of pounds a year compared to colleagues.
What impact would the CARE proposals have on a new starters' pension?
A:
UCU has commissioned further detailed research into the employers' final proposals. Their first proposals, now slightly amended, would mean a lecturer who retired now at the top of the Lecturer B scale with 35 years' service would receive a pension of only £15,704 compared a final salary pension of £22,962, a difference of more than 30%.
What impact would a two-tier system have on the workforce?
A:
The two-tier scheme would mean that new entrants will be paying the same as existing members for a vastly inferior pension. This is unsustainable in the long run. The employers have already made it clear that their preferred objective is for everyone to have a career-average pension rather than the existing final salary scheme. If we accept the principle of an inferior career-average for some staff, we will open the door to an attack on final salary across the board. The employers will use divide and rule to force down the level of pension benefits for the future.
What would the impact of a CARE style reduction in pension benefits be?
A:
UCU is not opposed to CARE on principle so long as it is not detrimental to staff. However, the employers' proposals clearly mean worse benefits for staff. The impact of this on our universities could be significant. A report from the British Universities Financial Directors' Group, stressed that 'pension rights are an important element of recruitment and retention policy. Diminishing their value to members would be likely to have an adverse effect on recruitment and retention'. 'HE employee pension contribution rates are higher than those of many private sector schemes', while 'notwithstanding recent and impending increases in salary rates, HE pensions are based on modest salaries by comparison with alternative competing professional occupations and it is ostrich-like to pretend otherwise.'
Why do the employers want to cut pension benefits?
A:
They argue that it is an issue of affordability. They claim that the sector cannot afford to pay more than the current 16% and they want to cut benefits to prevent future increases in employer contributions. The employers have made it clear in negotiations that their aspiration is for all staff, not just new starters, to move from a final salary scheme to CARE. As UCU has shown, USS is in robust health and the challenges it and other funds face could be met by adopting the union's proposals and simultaneously protecting benefits for current and future members.
Won't the employers cut jobs if they can't cut pension benefits?
A:
The reality is that the employers' pay/pension costs as a proportion of university spending have been declining over the last 20 years and it is not an inability to pay more that is the issue, but rather an unwillingness to do so. This remains the case even when you factor in actual and projected funding cuts in the sector. There is no valid argument linking the costs of pension provision with job security. There is no trade off between fair pensions and jobs. UCU has proposed a fair cost share between staff and management to address issues such as increased longevity but this was rejected.
Aren't all public sector pension funds going to have to make changes to save money. Why should academics have special treatment?
A:
USS is not a public service pension scheme, so it has to meet the same targets as other funded occupational pension schemes in the private sector. Its big advantages over such schemes are that the HE sector as a whole is less likely to go bust than any individual group of companies, so that it can afford to take a longer view. That does not mean that the politics of envy will not give traction to attacks on USS; but that is no good reason for the preemptive cringe that is part of what characterises the stance of the employers' negotiators.
VCs seem to get bigger and bigger pension pots when they leave. Are we as USS fund members paying for those private deals?
A:
Not really. Well under 0.1% of the active members of USS are VCs (or equivalent), so even though their pension benefits receive a much greater cross-subsidy from the sector as a whole than do those of the vast majority of people, the impact that has on the benefit expectations of members generally is, at current levels, imperceptible.
![[image depicting] UCU - University and College Union logo](./images/common/toplogo.gif "UCU - University and College Union's Logo")
