USSbriefs image showing negative-style image of USS pension scheme managers

‘Absent any new evidence’: USS continues to disregard the JEP report

On Sunday 12 May, Nick Hardy, our branch Pensions Officer, along with fellow members of USSbriefs Felicity Callard, Birkbeck, Gail Davies, Jo Grady, Jaya John John and Leon Rocha, issued a statement reacting to the news that the USS pension scheme managers had rejected the proposals put forward by the USS Joint Expert Panel (JEP).

The JEP was established after UCU members around the country took strike action to defend our pension scheme. The panel was tasked with examining the disputed valuation of the Universities Superannuation Scheme (USS), which lay at the heart of the industrial action.

USSbriefs has kindly agreed to allow us to re-publish their statement in full. If you aren’t already familiar with USSbriefs and the work they do, please do check them out.

Sunday 12 May 2019

The JEP’s first report was a compromise. It made numerous wide-ranging criticisms of USS but only a few of them led to concrete proposals for immediate changes to the valuation. Nonetheless, we know that if those limited proposals were adopted now, the result would be no deficit and no increase to the contribution rate established at the 2014 valuation.

The actuarial advisers to UUK and UCU have all declared that these proposals are acceptable, compliant with regulations, and would be their preferred outcome for the valuation.

On Thursday 9 May 2019, members received final confirmation that USS has rejected that compromise. In fact, the tweaks which USS has agreed to make to its valuation are so trivial that the lowest basic rate it will permit is 33.7%. USS is pretending that the rate could be as low as 30.7%, by offering to implement the rate changes in phases. This is another obfuscatory gesture on USS’s part, designed to make the outcome seem more palatable to employers and members than it should.

This is barely lower than the 35.6% rate arising from the flawed 2017 valuation which the JEP was designed to supersede. USS is not even close to halfway towards implementing what the JEP proposed.

Given that USS refuses to take the JEP’s initial compromise proposals seriously, it is clear that it will ignore any more ambitious proposals arising from the JEP’s second report, which addresses the governance and future valuation methods of the Scheme and will appear later this year. Meanwhile, USS has dragged out the current valuation process with multiple unexplained delays over the past six months (click here, here, here, and here for examples); introduced new misrepresentations of its position, especially with regard to the Regulator; failed to release important data to stakeholders; and held employers and members hostage by pressing ahead with its original 2017 contribution increases before it was obliged to do so.

Employers may accept a 33.7% rate in the short- to medium-term. However, USS is insisting that this rate would have to be split 65:35 between employers and members by default. In doing so, USS is trying to bypass the normal procedure for determining contribution structures, which involves employers and members trying to negotiate an agreement. In any case, whether USS’s usurpation of members’ right to negotiate is legitimate or not, sharing of the contributions would amount to a significant pay cut for members. Once member contributions climb from their previous rate of 8% of salary to around 10% or more, there is a serious risk that large numbers of members will leave the Scheme and undermine its financial health, as well as their own. Beyond the current valuation cycle, employers will drastically cut benefits or return to their original proposal to close the Scheme altogether. There is already evidence to suggest that this remains their longer-term ambition.

It was clear more than a year ago that this would be the outcome. On the morning of 28 March 2018, USS confidently declared that it its valuation process was ‘robust, independent and considered’, and that it would not change its valuation in light of criticisms made by the JEP, ‘absent any new evidence’. But the following afternoon, UCU General Secretary Sally Hunt and the unelected officials around her prevailed upon UCU’s Higher Education Committee to put UUK’s offer of the JEP out to an all-member ballot. There was not enough transparency or accountability in UCU’s negotiating procedures and in its communications with members during this phase of the dispute. Members were asked to decide whether to vote ‘Yes’ to set up the JEP immediately, or vote ‘No’ and press employers for binding commitments to hold USS to account if the JEP found that changes needed to be made. Members deserved to be informed about USS’s hostility to the JEP before they made that decision, but they were not.

We need to learn lessons from that phase of the dispute. It is naive to trust employers to put any pressure on USS to implement the JEP. Employers, and UUK in particular, have done hardly anything in pursuit of the JEP’s recommendations. UUK has already indicated that it will not contest USS’s final decision. The least UCU should ask for now is a hard commitment from employers to bring about changes in personnel in the USS Executive, Scheme Actuary, and, if necessary, Trustee. Employers have many different mechanisms at their disposal which they could use to achieve this, if they wanted to. These changes need to happen before the current personnel can exert any more influence over the next valuation cycle. It is only the current managers and some trustees of USS who refuse to recognise what this dispute, and the JEP, have demonstrated: that it is possible to keep USS going as an open, affordable, multi-employer scheme providing a guaranteed pension to university staff. Now is the time to secure its future.

USS: A Timeline of recent events. Graphic providing summary of key developments in the USS pensions dispute

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