USS bonuses went up £4 million as final salary pension scheme axed

Investment staff at the Universities Superannuation Scheme pocketed an extra £4 million in bonuses as plans to axe final salary pension schemes were finalised.

While many university staff at pre-92 universities were locked in an industrial dispute over radical changes to the sector’s largest pension scheme last year, 2014-15 was far kinder to executives and investment staff at the USS, its latest annual accounts show.

The amount paid to staff under incentive plans rose by £4 million in the year ended 31 March 2015 in light of strong investment returns, with the company’s top earner taking home between £900,000 and £950,000, the USS said.

A number of high-level executive appointments and other related increases in headcount also added an extra £4.6 million to the company’s personnel costs, which rose by 26 per cent last year to £44.1 million, it added.

It meant that the number of USS staff earning in excess of £300,000 more than trebled to 17 in 2014-15, up from five in 2013-14.

One of these employees was Bill Galvin, the scheme’s group chief executive, whose salary and benefits rose to £432,000, up from £309,000 the previous year.

The improved remuneration reflected the scheme’s “strong” investment performance, which had exceeded benchmarks and contributed an additional £500 million to the value of the fund last year, a USS spokeswoman said.

It was important for the fund to “attract and retain appropriate talent to continue to manage the scheme’s substantial assets”, which total about £48 billion, she added.

The USS still remained cost-effective, according to the latest available figures for 2013, which showed that its investment costs were about £20 million less than the industry standard for a scheme of the size and asset mix of USS, she added.

Mr Galvin, a former head of The Pensions Regulator who joined the USS in August 2013, added that recent high-level hires were a “substantial investment in our in-house capabilities” that “put the executive on a sound footing as we prepare to deliver the substantial changes put forward by our stakeholders”.

However, as reported in Times Higher Education last week, despite the excellent returns the scheme’s deficit rose substantially last year to £8.3 billion in March 2015 as low gilt yields and predictions of low long-term growth pushed up liabilities.

Under a plan accepted by the University and College Union earlier this year, the USS’ previous link to final salary will end next year, with institutions’ contributions rising to 18 per cent of salary and members’ contributions to 8 per cent.

The plan was agreed last month after consultation with USS members and institutions, although many academics have continued to challenge the rationale for ending final salary pensions, once regarded as a major perk of academia.

jack.grove@tesglobal.com