The University and College Union said industrial action over UK higher education’s biggest pension scheme was “inevitable” after employer-led reforms that would make payouts less generous took a significant step forward.
The Universities Superannuation Scheme’s joint negotiating committee (JNC) has agreed to progress Universities UK’s proposal to consultation with affected members and representative bodies, even though unions have warned that the changes could reduce employees’ guaranteed benefits by as much as 35 per cent, costing members thousands of pounds annually in retirement.
The vote passed on the casting vote of the JNC chair, Judith Fish, after it was supported by the five representatives nominated by UUK and opposed by the five appointed by the UCU.
The USS fund, which covers 340 employers has about 400,000 active and retired members, has an estimated deficit of between £14.9 billion and £17.9 billion. Planned reforms have been the subject of repeated strike action in recent years.
It has a hybrid structure, with defined benefits – which offer a guaranteed amount of pension – accrued on earnings up to a salary threshold, currently set at just under £60,000. Twenty per cent of earnings above that threshold is invested into a defined contribution scheme, under which incomes are tied to stock market performance.
UUK has proposed reducing the threshold for the defined benefit cut-off to £40,000, in the hope that this would allow the combined level of pension contributions made by employers and employees to remain at its current level of 30.7 per cent of salary, rather than rising to between 42.1 per cent and 56.2 per cent, as proposed by USS managers.
The UCU said UUK had pushed through its proposal before considering an alternative package put forward by the union and after rejecting its call for a month-long extension to negotiations.
In June, delegates to the union’s annual congress voted to ballot for industrial action if UUK did not change course, and the union said that it had now called a mass member meeting to start making preparations for a strike ballot.
“Employers represented by UUK have today voted to implement a set of regressive USS pension proposals that will reduce member benefits, discourage low-paid and insecurely employed staff from joining the USS, and threaten the viability of the scheme as a whole,” said UCU general secretary Jo Grady.
“Unless employers allow for a rapid consultation on our proposals with a view to revoking their decision today, the path looks inevitably to lead to industrial action – and that is the responsibility of UUK.”
A spokesperson for USS employers said the JNC vote “provides a viable and implementable solution” for the scheme’s future, and was “the least bad compromise possible”.
“USS’ formal assessment of the scale of the deficit means that no change is not a viable option,” employers said. “We understand that the benefit changes passed by the JNC will be unwelcome for scheme members, but the huge increases in contributions required to keep benefits the same are unaffordable for most members and employers.”
The spokesperson said that they would be “happy to explore viable alternative proposals for reform” from the UCU and that the consultation could lead to UUK’s own proposals being amended.
The UCU previously said that its modelling showed that under UUK’s proposals, a typical USS member aged 37 and earning £41,526 – the current starting salary for many lecturers – would build up an annual guaranteed pension of £12,170 if they continued to work full-time in the sector until age 66.
This compares with £18,857 under current benefits – a 35 per cent cut, which would also apply to the guaranteed cash lump sum that members receive on retirement.
UUK has countered that the typical reduction in benefits for a staff member earning £40,000 would actually be about 12 per cent because benefits earned before the change would be unaffected. To keep current benefits, the typical USS member would need to pay in at least £1,660 more annually, it said.
UUK suggested that staff could earn the same pension amount by working longer – about four years longer for someone starting their career at age 25 and earning £40,000.