Because we want the employers to stop pretending the pension scheme is in crisis and put pressure onto USS (the Universities Superannuation Scheme) to implement the recommendations of the Joint Expert Panel. In what follows, we try to explain what that means:
In 2017, the USS pension scheme produced a valuation which suggested that the scheme was in crisis. Universities UK (UUK) which represents the University employers responded to this by voting to convert the current Defined Benefit scheme (which is a shared, mutualised pension fund which guarantees a wage-related pension and which is underwritten by the universities) to a Defined Contribution Scheme (where each member has an individual unprotected pension pot). However, the underlying principles of this valuation were immediately criticised as being massively flawed, especially the calculation called ‘Test 1’, which is designed to ensure the scheme is self-sufficient if closed down. A subsequent consultation with employers indicated that they wanted to respond by reducing the risk of investments. However, in practice, this translates into a strategy of low return investments, which actually does threaten the long-term viability of the scheme.
Following strike action in early 2018, UUK agreed to set up the Joint Expert Panel (JEP), which has three members nominated by UCU, three nominated by UUK and an independent chair. Since then the JEP has been looking at the valuation and the long-term sustainability of the scheme.
Their first report was published in September 2018 and was at odds with the position of USS and was broadly welcomed by UCU. The initial response by the employers appeared positive, but their subsequent actions have been to reject most of it and avoid putting pressure on USS to implement its recommendations.
Importantly, it’s not just the JEP that has problems with USS’s valuation. In January 2019, the Pensions Regulator requested that USS stop claiming parts of the valuation (including the de-risking) were required by them. The chair (our very own Vice-Chancellor, David Eastwood), didn’t even inform the USS trustee board about this for four months. The USS board member who forced this revelation (a Professor of Statistics) has been suspended then sacked from the board without explanation.
The JEP has now published a second report which has proposed a number of specific changes, covering the valuation, investment strategies and governance, and which are positive responses to the criticisms outlined above. Employers responses have been largely muted, but some have produced joint statements with their UCU branch welcoming the recommendations.
Even with the current de-risking strategy, in 2019 the fund had outgoings of £2.2bn and income of £6.2bn. However, USS is still working on the basis of an incorrect valuation, resulting in UUK agreeing to needless increases in contributions for employers and employees. As a result, in October 2021 employee contributions rise to a discouraging 11% of salary.
Instead of looking for solutions to these problems, UUK has endorsed a plan that deters staff from joining the scheme whilst actively propagating a sense of crisis. Some have suggested that this is consistent with a desire to permanently remove any employer liability for pensions, by moving from our shared pension fund, which offers far better protection for our retirement income, to individual ‘contribution’ based ones.
So far, USS have ignored the recommendations of the JEP and UUK have let them, despite concerted attempts by UCU members to get UUK to press USS to implement the panel’s main recommendations. But basically, the scheme is sustainable without massive contribution increases for employers and employees if USS follow the JEP recommendations.