As Swansea University is aware, UCU is in dispute with the University employer over pensions. We would urge Swansea University, whose representative body for pensions is UUK, to instruct their representatives to help to resolve this dispute.  

The UCU demands are reasonable, affordable and straightforward to implement. They would strengthen the Swansea University’s strategic plan, they will lead to improvements in all areas of our work, including the University KPIs, staff wellbeing and the student experience. They will improve the international reputation of the entire sector.  

Swansea University UCU asks that the University publicly call on UUK to meet the reasonable and easily achievable demands in the UCU dispute letter.  

The letter to UUK (on USS) 8 November 2021 calls on UUK to consult employers on:  

· Withdrawing their current un-agreed detrimental changes to members’ pensions;  

· Whether they would be prepared to pay higher contributions for fixed period of time to allow a negotiated settlement; and  

· To call publicly for a 2021 valuation.  

Background on USS  

Against the backdrop of repeated misleading statements from UUK, the UUK cuts to USS pensions, which are significant and which will impact most severely on the next generation of university staff, were voted through by JNC Chair’s vote on 31 August 2021.  

UCU has since written to USS CEO Bill Galvin, outlining a legal case relating to serious grounds for questioning the rationality and reasonableness of the decision-making of the trustee.  

However, the March 2020 valuation has now been submitted to the Pensions Regulator (TPR), ahead of the legally required 60 day consultation with members. The valuation date of March 2020 was an extreme low point due to the initial impact of the pandemic, with funding positions of DB schemes falling dramatically at March 2020, then recovering significantly.  

Views on the 2020 valuation  

The following quotes support the widely held view that the 2020 valuation gives a highly pessimistic and misleading measure of the financial health of the scheme.  

… more disturbance from striking academics. It is easy to condemn them, but I do not. They are the victims of unduly risk-averse decision making at the Universities Superannuation Scheme, under the influence of misconceived regulation. [Martin Wolfe, Chief Economics Commentator, Financial Times, 14 November 2021] 

31 March 2020 was a poor date to carry out a valuation compared with market conditions at 31 March 2018. However, the position has since improved for most schemes. … Given the exceptional circumstances at 31 March 2020, there is a danger that too much can be read into the conclusions of a valuation at that date. [UUK Actuaries AON, April 2021]  

The 2020 valuation methodology is described as ‘misleading’ and a ‘hall of mirrors’ by UUK’s actuary [AON report, April 2021]. The valuation is described by UUK as ‘unjustified’, ‘unnecessary’, and ‘unaffected by the evidence presented’ [public letter from UUK to USS, May 2021].  

In the case of the USS, the right option is to make conservative, but not insanely pessimistic, assumptions and conclude that it is healthy. [Martin Wolf, Chief Economics Commentator, Financial Times, 27 June 2021]  

The level of cuts and the cost of maintaining benefits  

The UUK proposals to cut benefits have three parts  

· Reduction in accrual rate from 1/75 to 1/85  

· Cap on interest at CPI of 2.5% (currently capped at 5% plus half from 5%-10%)  

· Lowering of DB threshold from circa £60k to £40k  

Since May 2021, UUK has issued consistently misleading statements on the level of cuts and the cost of maintaining benefits throughout UUK consultations.  

For example, the USS modeller makes it clear that the reduction in future guaranteed pension income is significant. The cuts range between 17% and 48% for Consumer Price Index of 2.5%. If CPI is 3.5% the cuts range between 28% and 56%. The cuts hit the youngest and the next generation the hardest.  

As UCU stated in its dispute letter of 22 September 2021, the level of cuts to the future guaranteed pension for a typical member are 35%, and this reduced to cuts of 23% when the non-guaranteed DC is included.  

The UUK proposals will mean a USS member aged 37 earning £41,526 (the current starting salary for a lecturer in many institutions) can be expected to go on to build up an annual guaranteed pension of £12,170 if they continue to work full time in the sector until age 66. This compares with the £18,857 annual income which they would build up under the existing arrangement. The same 35% cut would also apply to the guaranteed cash lump sum which the member would receive when they retire. Even when the expected extra cash is included into this member’s DC pension pot and then converted into USS DB pension, the cut from the UUK proposals remains at 23% of pension income.  

UUK has consistently briefed against this estimate from UCU’s actuaries, with UUK’s Head of Pensions writing to UCU explicitly writing to VCs to say this statement is ‘untrue’.  

The cost to Universities of retaining benefits  

The cost of maintaining current benefits to the end of the University financial year would be less than previously budgeted by Universities under their 2018 Schedule of Contribution October rises.  

Under the backstop, retaining full benefits, the cost is £1m, far less than budgeted by most and significantly below the much larger amount estimated in Universities’ risk registers.  

These are costs that are affordable to Universities up to October 2022 and that maintaining full benefits under the backstop until October 2022 would allow space for negotiation and a new valuation.  

Given that the UUK proposal for cuts to future service benefits are clearly and visibly not the best that can be achieved against appropriate assumptions, we recommend that University publicly calls on UUK to meet the UCU demands.  

 Swansea University UCU