After more than ten meetings and careful consideration of the state of the USS pension scheme’s finances, the USS Joint Expert Panel (JEP) has concluded that the way the scheme has been valued to-date could be much improved.
In diplomatic language, the JEP confirms what a wide range of independent critics of USS valuations, including UCU and their actuaries First Actuarial, last year argued.
The JEP comments that the much-challenged ‘Test 1’ had “assumed too much weight in determining the valuation” and call for a re-evaluation of the sponsor covenant. The report’s authors say that “greater weight should be given to the unique features and strengths of the higher education sector” — echoing what many of us have been saying throughout.
They reason that this would be entirely possible while keeping the Pension Regulator on-side and the Trustees’ fiduciary duties protected.
They also express concern about the way UUK consulted over their members’ risk appetite. They say “the framing and context of the questions asked of employers have, in our view, produced misleading results”, that has led to outcomes that “on exploration, appear to be inconsistent with many employers’ wishes.” (p9-10). On page 56, they argue for a return to the September Technical Provisions, something that UCU Left negotiators were arguing back in November (and that the right-wing IBL faction and UCU officials opposed as unrealistic).
The headline outcome is that as an interim measure they estimate that, without significantly changing the valuation methodology but reverting to these provisions, a scheme paying “broadly similar benefits”* would likely cost an additional 3.2% of salary on top of the 26% of salary currently paid by employers and employees.
With a 2:1 share, this would mean that employee contributions would increase by a little over 1% (expected from April 2019).
The employers created the crisis of USS by their own actions, promoting de-risking and limiting the employers’ covenant.
The employers can afford to pick up the entire cost. They have already conceded paying 6.9% more under cost-sharing. So they could pay the full 3.2% and still halve their costs.
Oxford University has already agreed to this. We should demand other universities do the same.
If they refuse, we will need to make them pay.
Members are facing a real-terms pay cut as a result of the 2% offer that some employers are already imposing. This 1%+ additional cost would further increase the scale of that pay cut. There is every reason to fight over pay and vote YES to action in the Pay ballot. (Outside of national bargaining, Imperial College has already offered 3% to its staff.)
Where do we stand?
In the first place this report represents a step forward that vindicates UCU members who stood out in the snow and rain to defend their pensions. We were right to strike.
The employers’ strategic move to talk up the “deficit” and push 100% Defined Contribution backfired when staff voted and struck in their tens of thousands. The union grew by 50% in some workplaces. Intelligent critique married to mass collective strike action changed the equation.
The report should represent the final nail in the coffin of 100% Defined Contribution.
However, if this report is implemented (which is by no means certain) we will still pay more. The report proposes a total increase in contributions of 3.2%, which implies an increase to employees of around 1% of salary costs. This is less than USS’ plan under Rule 76.4-8 to charge employees 3.6%, but it is still an increase.
These costs might conceivably be reduced if the JEP is able to persuade USS to improve its valuation methodology in the second stage of its work, but that will only affect the next valuation round in 2020.
That is why we should raise the demand again for No Detriment, and insist that the employers should pick up the cost.
- Branches should call Activist Meetings as soon as possible and General Meetings before the start of term (or as soon as possible if the term has started) to discuss the report and the state of the Pensions dispute with as many members as possible.
- Activists should demand No Detriment. We did not undermine the Pension scheme. The JEP report concludes that the scheme is in sound health. And the employers can afford to pay.
- The current ballot in the Pay campaign is an opportunity to harness this enthusiasm. We have a live national ballot and members should be strongly encouraged to vote YES for Strike Action and YES for ASOS. If USS impose an additional cost of 1% on our salaries then we should bill our employers! So we need to organise the Pay Campaign seriously and campaign to Get the Vote Out.
- Branches are entitled to send motions and delegates to the HE Special Conference in Manchester.
- Regional Committees should call Regional Activist Meetings to assist this process.