USS faces significant benefits changes

USS faces significant benefits changes

Universities UK is proposing changes to the Universities Superannuation Scheme (USS) to address deficit issues and a significant rise in the cost of future pensions.

A deficit of approximately £7.5 billion and the cost of funding current benefits has risen by at least 11 percent, prompting calls for a change.

Advocacy group Universities UK, which represents 350 higher education employers in the USS pension scheme, has proposed delivering future benefits through the the USS Investment Builder section, a defined contributions scheme.

This proposal aims to tackle the scheme’s financial deficit and rising future costs while ensuring that it continues to offer attractive pensions benefits to members, according to Universities UK.

Alistair Jarvis, chief executive of Universities UK, said urgent action is required to ensure the USS scheme remains sustainable: “The costs of USS need to be controlled to ensure the scheme remains sustainable and secure for the long-term. Change is needed to address the scheme’s deficit and the rising cost of future pensions.”

“Our proposals for reform will tackle the scheme’s funding challenges so that universities can continue to offer attractive pensions benefits to staff.”

The USS scheme provides “generous” benefits to members, with employers contributing 18 percent of salaries and members 8 percent of salaries, according to Universities UK.

The current hybrid scheme is a mixture of defined benefits (through the USS Retirement Income Builder) on salaries up to £55,550 and defined contribution (through the USS Investment Builder) on salaries above that threshold.

With defined benefits, the amount members receive on retirement is set using a formula based on average pensionable earnings during active membership. With defined contributions, the amount members receive on retirement depends on the amount the member and employer have contributed and investment returns.

Jarvis said: “Most universities can’t afford to pay more into pensions without diverting money from other central areas, such as teaching or research, reducing their positive impact. Increasing contributions could damage the high standards that students, research funders and others rightly expect. It could even undermine the sustainability of some institutions.”

“The option of no reform would be a dangerous gamble that employers are unwilling to take.”

Any changes to the USS pension scheme will be subject to multiple consultations and will not progress until at least early next year.

The Universities and College Union (UCU) said the proposals to remove the guaranteed level of pension benefits for hundreds of thousands of university staff “were a bolt from the blue”.

In response, UCU is planning to ballot its members for industrial action on 27 November until 19 January.

Sally Hunt, general secretary of UCU, said: “After months of negotiations these plans are a bolt from the blue and would effectively destroy the USS scheme. It is categorically the worst proposal I have received from universities on any issue in 20 years of representing university staff.”

Universities UK called UCU’s threat of industrial action “premature and disappointing”.

Categories: News, UK Pensions

About Author