In the Emergency General Meeting we called on pensions earlier this month to discuss the developing situation of potential USS pension detriment, we pointed out the deficiencies of the survey sent round to USS members by the University as part of the Universities UK (UUK) consultation of its members, i.e. the employers. The survey seemed designed to achieve a pre-determined result and there was considerable support for the idea that we run our own parallel survey asking different more relevant questions. So we did just that and sent the survey round later the same week. You can see the results in statistical form and with brief analysis of the statistics and members’ additional comments here

The standout feelings of members were:

 1: that the USS scheme’s secure defined benefit nature was highly valued;

 2.: that there was opposition to the kind of two-tier pension being proposed where lower paid staff would have defined contribution conditions and higher paid ones would have defined benefit;

 3: that the death and incapacity benefits of a defined benefit pension were highly important;

 4: that significant governance reform was required by USS in order to achieve a realistic valuation of the pension fund.

The scheme’s current value stands at £80B+, with its non low-risk assets performing extremely well.

We shared the outcome of our own survey with the University and met with the Director of Finance who had been tasked to draw up the University’s response to the UUK consultation. The Director of Finance then shared her own draft report with us and asked for our feedback. This was useful engagement and cooperation and I’m pleased to say that her report showed that she had taken on board some important elements of our case. So, for example, her report begins as follows:

“The University’s first position is that it believes that the valuation methodology takes too prudent an approach and that the underlying assumptions should be revisited. This would be our preference as a way forward and we would like to see UUK continue to press the USS trustee to review the assumptions.

Additionally, we believe both The Pensions Regulator and the USS Trustee are taking an unnecessarily prudent approach to the covenant strength of the sector, on the basis of one exit from the Scheme. There is no history of universities becoming insolvent and there is little evidence to suggest that this is likely in future.”

It goes on later:

“There is no doubt that the way that this valuation process has been conducted has been wholly unsatisfactory and a review of where the shortfalls and failings have been is absolutely essential.

This recognition of the flawed methodology being adopted by USS is a positive start and we are continuing to engage with the University, hopefully with a view to an agreed joint statement on pensions, as has happened already at several other institutions.

More widely, we understand that UUK is concerned that its members (i.e. the University managements) are not unified in their consultation responses and are not uniformly confirming UUK’s line of basic acceptance of USS’s assumptions even if proposing a different but in many ways equally detrimental way of putting them into practice. So there’s good deal of questioning and challenging going on by Universities, influenced at least partly by strong responses from UCU, both locally and nationally. The grapevine even says that USS is now concerned that they may face opposition from UUK and have been attempting some not very subtle interventions and potentially meddling in industrial relations, which is inappropriate. 

Looking forward, the employer consultation has now closed and there will be a 2-3 week write-up period and then a consultation with UCU. Then, on the UCU side, the matter will be discussed by our Superannuation Working Group and then go to the JNC, the joint employer-employee negotiating committee, and we can expect a final proposal from UUK in July or August.

As for UCU, we’ll have to explore every avenue in the campaign we wage. It’s unlikely that reason, logic and fairness will be enough. We’ll need to look at. for example, things like conditional indexation, a possible legal challenge to USS on the grounds that the Trustee is not acting in the fiduciary interest of scheme members, and, if the worst comes to the worst and very reluctantly, even industrial action. Short of that we need to push for commitments from employers on extending covenant support, governance reform, and lobbying for regulatory change. We believe USS can provide members with good pensions by ensuring that a significant majority of its holdings are in assets that generate relatively high returns. It should stop and ultimately reverse its current tendency to hold an increasing proportion of low-yield, fixed-income assets such as gilts. As for UUK, we want it to showing more support for and confidence in the scheme as a vital element in the sector. Above all we want to see UUK and UCU working together to end the cycle of dispute over pensions.

Howard Moss

Swansea UCU Pensions Rep