Vice-chancellors and pension bosses are at loggerheads over the future of UK higher education’s biggest fund.
The Universities Superannuation Scheme (USS) published a consultation document on its 2020 valuation in September, which estimated that contributions might have to be between 40.8 per cent and 67.9 per cent of salaries to curtail the scheme’s rising deficit.
But this would be a significant increase on the current level of combined contributions from employers and employees, of 30.7 per cent.
And in a response to the consultation published on 13 November, Universities UK (UUK) says that it has made clear that “current levels of contributions are at the limit of acceptability”, something that USS has “seemingly ignored”. Two-thirds of respondents to a UUK survey had “significant concerns” regarding USS’ figures.
“Employers do not regard the illustrative figures as representing credible scenarios and would represent an extreme and unwarranted shift from the trustee [USS] towards risk-aversion,” the response says.
“These figures would undermine the strength of the scheme and employers do not consider they represent reasonable options for the trustee to implement…it is surely unreasonable for the trustee to separate themselves from the reality of the contribution levels they are illustrating.”
In the valuation document, USS said that its deficit, which was £3.6 billion at the previous valuation in 2018, could range from £9.8 billion to £17.9 billion.
It said that the increase in contributions could be kept at the lower end of the scale and the deficit reduced to about £10 billion if employers agreed to a range of measures, including a long-term rule change that would prevent employers leaving the scheme for the next 30 years and prioritising USS pensions over any new debt.
UUK says that a joint expert panel convened in partnership with the University and College Union had found that the scheme’s deficit could be closed in 15 to 20 years “without the need for additional covenant support measures”.
More broadly, UUK describes USS’ approach to presenting its proposals as “unhelpful” and says that employers had “found it incredibly difficult to make sense of the material”.
UUK says that it hoped that the consultation would “engage employers on the issues, and on the potential solutions in the round”. But the consultation “has been the missed opportunity that UUK and employers had feared”.
The increase in pension contributions and anger over their affordability has led to widespread industrial action in the sector, starting with strikes in 2018 that were reignited in 2019 and took place at 52 universities in 2020.
In response, USS said that its 2018 valuation “assumed employers would make additional commitments” to strengthen the position of the fund but these “are still to be put in place”.
“We recognise the extreme difficulties UUK faces in building a consensus across 340 disparate employers, particularly in securing a uniform and long-term commitment to USS,” a spokesman said.
“Equally, they must appreciate the difficult position in which their response places the trustee: after 18 months of deliberations, their suggestions for key covenant support measures fall considerably short of the commitments required.
“We will need to work with UUK urgently to see if we can find a way forward on this critical issue.”
The spokesman said that UUK’s position was “likely to result in contributions that are unaffordable for employers and members”.
“We are committed to striving for the best outcome possible in incredibly challenging circumstances,” USS added.