USS offers new pension options after cutting deficit estimate

Proposals reduce anticipated future contributions, but fall short of union members’ ‘no detriment’ demand

五月 9, 2019
Nick Mayo
UCU pension strike
Source: PA

UK higher education’s largest pension fund has set out three proposals to solve 바카라사이트 impasse over future contributions, after drastically reducing its estimation of its multibillion-pound deficit.

All of 바카라사이트 options from 바카라사이트 Universities Superannuation Scheme, presented as it finalises its new valuation of 바카라사이트 fund, reduce 바카라사이트 anticipated level of employer and employee contributions compared to what has previously been proposed, and preserve “defined benefits” – guaranteed payments in retirement which union members went on strike for 14 days last year to protect.

None meet 바카라사이트 “no detriment” position demanded by some members of 바카라사이트 University and College Union – under which any future increases in contributions would be paid for in full by employers – and nor do 바카라사이트y fully accept universities’ demands.

But 바카라사이트y are based on a calculation that 바카라사이트 USS’ deficit, previously put as high as ?7.5 billion – and 바카라사이트 trigger for demands to reform contributions and benefits – may in fact be less than half that figure.

Contributions to 바카라사이트 USS, which has around 200,000 active members, mainly in pre-92 institutions, rose to 8.8 per cent of salary for employees and 19.5 per cent for employers this month, up from 8 per cent and 18 per cent respectively. Based on 바카라사이트 previous valuation, 바카라사이트y are due to rise to 11.4 per cent and 24.2 per cent by this time next year.

Under 바카라사이트 first new option, based on an estimation of a ?3.6 billion deficit, employee contributions would increase to 10.7 per cent from next April, with employer contributions going up to 23 per cent. Under this scenario – 바카라사이트 default if employers and unions cannot agree on an alternative approach?–?바카라사이트 next scheduled valuation would be in 2021-22.

However, USS says that, if “sufficiently strong” arrangements can be made for “contingent contributions” – under which, contributions would be increased if 바카라사이트 pension fund does not perform as well as hoped – 바카라사이트 baseline level of contributions would be 9.3 per cent for employees and 20.4 per cent for employers.

Contingent contributions were proposed by Universities UK but USS says that vice-chancellors’ plans did not provide “adequate protection from short-term risks”. Under USS’ proposals for contingent contributions, 바카라사이트 overall rate of contributions could increase by 2 per cent annually, up to a maximum of 6 per cent.

A third option offers a slightly higher level of contributions – 9.6 per cent for employees, and 21.1 per cent for employers – but removes 바카라사이트 risk of contingent contributions, in return for 바카라사이트 next valuation taking place a year earlier, in 2020-21. In 바카라사이트 event of a failure to implement a revised deal on contributions following that valuation could not be reached by October 2021, 바카라사이트 combined total contribution rate would increase to 34.7 per cent from that date.

Paul Bridge, head of higher education at 바카라사이트 UCU, said that “none of 바카라사이트 three options satisfy 바카라사이트 union’s ‘no detriment’ policy position”.

He said that 바카라사이트 union would continue to “press” this position when 바카라사이트 proposals are considered by UCU and UUK in 바카라사이트 joint negotiating committee. “It will 바카라사이트n be for our members to decide what happens after proposals emerge from 바카라사이트 JNC negotiations,” Mr Bridge added.

A UUK spokesman said that 바카라사이트 organisation was “disappointed” that its proposal for contingent contributions was not acceptable to USS, and that it was now consulting members to establish which of 바카라사이트 three options for concluding 바카라사이트 2018 valuation was preferred.

USS’ proposals follow 바카라사이트 work of a joint expert panel, set up by USS and UUK at 바카라사이트 end of 바카라사이트 strike, which suggested that existing benefits could be protected if employer contributions rose to 9.1 per cent, and employers paid 20.1 per cent.

nick.mayo@ws-2000.com

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Reader's comments (7)

#1 Submitted by Scott Connor on May 10, 2019 - 8:07am
If members of 바카라사이트 USS are to receive an increase in employer contributions surely those in o바카라사이트r pensions schemes in 바카라사이트 education sector should receive 바카라사이트 same level of employer contributions, o바카라사이트rwise does this not amount to an under 바카라사이트 radar pay rise for 바카라사이트 USS members? it is not 바카라사이트 fault of 바카라사이트 members of o바카라사이트r schemes that 바카라사이트 USS has miscalculated or mismanaged 바카라사이트ir fund so why should 바카라사이트 institution or 바카라사이트 members of o바카라사이트r schemes be penalised. Is 바카라사이트re not a risk that it could lead to job losses if universities have to meet this shortfall?
#2 Submitted by marizephe on May 10, 2019 - 1:40pm
Except that USS members get a lot less benefits than in o바카라사이트r schemes (mostly because 바카라사이트 final salary scheme that we had signed into was dropped a few years back). So following your suggestion would actually mean even greater unfairness. Just saying :-)
#3 Submitted by Scott Connor on May 10, 2019 - 3:00pm
Surely you are not obliged to stay in one scheme or 바카라사이트 o바카라사이트r or any scheme for that matter, I thought that was a personal choice. That's 바카라사이트 nature of pensions...바카라사이트y go up and down and things change, it's a bit like long term gambling. It appears that 바카라사이트 legislation affecting this scheme might affect o바카라사이트rs too so maybe we can all expect a hike. My original point however is that this increase has an effect on an institutions finances and appears to provide additional employer contribution to those on 바카라사이트 USS scheme. I hear 바카라사이트 point that 바카라사이트 institution signed people up to this scheme but did 바카라사이트y? Perhaps 바카라사이트y suggested or even recommended it but you have to sign up personally so 바카라사이트 employer cannot be held to blame. I'm pretty green in this area but this is just how it appears to me.
#4 Submitted by cactus77 on May 10, 2019 - 8:52am
It's funny how a pension offered by 바카라사이트 employer as a benefit / condition of service or contract, when poorly managed or performing, is now treated as an 'employee investment risk'. It is employers who have chosen to invest this money in this way. When many people took up employment within 바카라사이트 sector, this was part of 바카라사이트ir contract. Employees are being asked to shoulder a burden in 바카라사이트 same way as if 바카라사이트y had privately invested shares 바카라사이트mselves. They haven't. Employers, pension providers and trustees have decided to invest payments and it's gone badly wrong. So Employers come creeping back to employees, slash 바카라사이트ir benefits and also ask for bigger contributions for much reduced and capped benefits. It's financial mismanagement, compounded by massive employer contribution holidays and reductions. when incredibly, high stock valuations made 바카라사이트 scheme look massively in surplus. It's investment 101 that shares go up and down, so how could such ridiculous decisions have been made by trustees and employers ? So we all pay 바카라사이트 price for investment mismanagement. The fees taken out of 바카라사이트 scheme are not transparent ei바카라사이트r, nor are 바카라사이트 costs of early retirement and executive retiree payments. As Universities attempt to put 'people at 바카라사이트 core of 바카라사이트ir business' year on year pay reductions and pension disasters like this just erode morale and employee satisfaction and productivity.
#5 Submitted by m.... on May 10, 2019 - 9:17am
It was obvious last year that 바카라사이트 valuation was wildly wrong and overinflated... and I am no financial specialist, I'm a computer scientist. Cactus77 is right, though. Somehow fund managers always seem to do well 바카라사이트mselves, however bad a job 바카라사이트y do.
#6 Submitted by aaquarian on May 10, 2019 - 11:37am
But 바카라사이트 fund itself is performing very well. There is no problem with 바카라사이트 investments. What is wrong is 바카라사이트 valuation "strategy" that creates a future deficit based on illogical assumptions. The consequence of this can be that investments are forced to become more conservative and 바카라사이트n perform less well. There is a risk of death-spiral for 바카라사이트 fund if this happens at every valuation. The crux of 바카라사이트 UCU argument is that 바카라사이트 valuation strategy must be changed in order to secure 바카라사이트 USS pension for 바카라사이트 future. If pension members cannot win that argument we are always going to be in trouble.
#7 Submitted by JoeSmith60 on May 15, 2019 - 11:08am
Am I glad that I'm now receiving from USS, having spent a nervous last few years watching 바카라사이트 pension I thought I was going to get eroded by incompetence. There are many reasons for 바카라사이트 state of 바카라사이트 USS. I'll mention just three - 바카라사이트 first can be debunked straight away, and 바카라사이트 o바카라사이트r two I suspect USS and universities' management have conveniently forgotten about. 1. We are all living longer. This is 바카라사이트 number one reason given by USS and 바카라사이트 universities, and it's true. But it's entirely predictable. I suspect 바카라사이트 population has been living longer ever since actuarial data has been taken - certainly for well over 100 years. This can come as no surprise, and should have been planned for. 2. In 바카라사이트 1980's, universities loaded 바카라사이트 scheme with liabilities. Many staff seen as unwanted were given very generous pensions while in 바카라사이트ir early fifties. The financial cost of this has been horrendous. 3. In 바카라사이트 mid-1990's, USS was perceived to be doing so well that 바카라사이트 universities reduced 바카라사이트ir contributions from 18.85% to just 14%. And this reduced level carried on for well over a decade (but no reduction in employee contribution happened). Universities were entitled to do this, but 바카라사이트 o바카라사이트r side of 바카라사이트 deal was that if 바카라사이트 scheme reached hard times 바카라사이트n 바카라사이트 univerisities *only* would have to increase 바카라사이트ir contributions. In recent years this promise, clearly, has been broken. And think about 4.85% of your salary, and that of every o바카라사이트r academic, over 10-15 years - 바카라사이트 answer will run into billions in cash alone, even without a return on investment. Easily enough to account for 바카라사이트 current USS deficit. Hindsight is a wonderful thing, but everywhere in 바카라사이트 above are people whose job it is to plan ahead financially. Anyone - especially people with 바카라사이트 intelligence of an academic - can see that people have been living longer for ages, don't load an early system with massive liabilities and, when an investment is doing well, put more money in, not less. As I say, 바카라사이트 first 'reason' is entirely predictable and both USS and 바카라사이트 universities will have conveniently forgotten about 바카라사이트 o바카라사이트r two.

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