Employers and union at loggerheads as USS deadline looms

Union members are currently in the second round of industrial action over pension and pay disputes, having rejected a deal struck between the USS trustee and Universities UK, the group representing 340 USS employers, designed to avert rate rises required by the scheme’s controversial 2020 valuation.

It is deeply regretful that UUK did not take the steps to consult before now, wasting two weeks of valuable time. I am urging UUK to now carry out an urgent and rapid consultation of university employers

Jo Grady, UCU

The deadline for a deal to be struck falls at the end of this month when the USS trustee must present regulators with a contribution schedule. UUK representatives told a press briefing on February 10 that the only alternative would be to revert to the trustee’s initial schedule, which could see rates increased to as much as 52.2 per cent of payroll.

The UCU has argued that UUK’s deal would see cuts to guaranteed retirement income of 35 per cent for an “average member”, though UUK has several times contested the union’s figures.

It has also rejected the union’s proposed alternative, which called for a new valuation to account for improvements in the USS’s financial position following the market shocks caused by the Covid-19 pandemic.

Under the UCU’s proposal, member contributions would stand at 11 per cent and employer contributions at 23.7 per cent from April to October this year, rising thereafter to 11.8 per cent for members and 25.2 per cent for employers from October.

The union also demanded that employers agree to pay a maximum of 25.2 per cent and members a maximum of 9.8 per cent from April 1 2023, “so as to secure current benefits or, if not possible, the best achievable as a result of the call on the USS to issue a moderately prudent, evidence-based valuation”.

UUK rebuffed the suggestion at the time, arguing that the rate rise was far in excess of the mandate given it by employers.

Its own proposals would set contribution rates of 9.8 per cent for members and 21.4 per cent for employers, though it is currently negotiating amendments with the USS trustee that would see those figures rise to 9.9 per cent and 21.6 per cent in exchange for temporarily dropping a proposed inflation cap.

Time is running out

Speaking on February 10, professor Julia Buckingham, spokesperson for USS employers and former president of UUK, sought to minimise the impact of the UCU’s strike action but nonetheless held that it was “very unsettling for students”.

“Time is running out now to complete the 2020 evaluation of the USS pension scheme and prevent the introduction of hugely damaging costs both for employers and for members of the scheme,” she said.

The USS trustee was clear that changes to the scheme must be agreed by the end of February “if we are to avoid a punishing and unaffordable cost escalation in April, which would see already-high member and employer contribution rates double over the next three years”.

Buckingham criticised the union’s proposals, arguing that they contradicted statements issued last year “but never officially tabled”, which more closely matched employers’ proposals.

“On the latest proposition, the contribution of scheme members would increase from 9.8 to 11 per cent of salary this April, and again to 11.8 per cent of salary in October 2022,” she said.

“These higher costs — 2 per cent of salary from October — would make the scheme unaffordable or even more university staff forcing them to opt out and leaving them without a workplace pension and an employer contribution towards their retirement.”

She added that the proposal for employers, which would see contributions increase from 21.4 per cent to 23.7 per cent in April and then again to 25.2 per cent from October, amounted to an additional £330mn cost.

“Throughout this valuation process, employers have given a very clear message that the current contribution rates are at the limit of affordability and sustainability, and that paying more would have a significant detrimental impact on the sector’s collective ability to continue delivering globally leading our education,” she said.

Buckingham argued that employers would like to retain current benefit levels, but that they could not afford to retain them “without damaging the university experience” of students.

She added: “We continue to meet regularly with the UCU to try to find an affordable, viable solution by the end of the month. However, as things stand, there is unfortunately a big gap between the position of the employers and the UCU.

“Instead of taking repeated industrial action, the union could focus on working to create a fairer, better, sustainable [solution],” and focus its work on supporting an independent governance review aimed at creating a “lower-cost option for junior staff and those on a low pay grade”, and at addressing “the high opt-out rate”.

‘No impediment’ to implementing UCU proposals

Though UUK criticised the UCU’s alternative proposals when they were first published, arguing that they were not a “serious attempt” to resolve the matter, the union has since received a letter from the USS trustee that confirmed there was “no impediment” to implementing them.

UUK had previously told the union that, “should the USS trustee validate your proposal as an implementable solution to the 2020 valuation, we will formally consult employers on it”. Now, following confirmation from the trustee, UCU general secretary Jo Grady has written to UUK chief executive Alistair Jarvis asking him to fulfil that promise.

“I am pleased to say that the USS trustee, after working together with the UCU, has confirmed that our union’s compromise proposals are both viable and implementable,” she wrote.

“It is deeply regretful that UUK did not take the steps to consult before now, wasting two weeks of valuable time. I am urging UUK to now carry out an urgent and rapid consultation of university employers.

“The UCU’s proposal presents a solution to the current dispute by protecting benefits and providing room for both parties to immediately open productive discussions on the future of the scheme, which must include a new evidence-based valuation,” Grady continued. 

“Together, we can protect pensions and avoid disruption to education. Will you choose to do that with me, and act in the best interests of the sector?”

In a statement, Grady said that “time is running out” to protect USS benefits and “avert widespread industrial action, which is due to start Monday [14]”.

“UCU’s proposals reflect the views of a majority of scheme members who responded to the USS consultation, and will prevent devastating cuts while providing room for a new evidence-based valuation,” she said.

“The excessive prudence of the 2020 valuation has already shown itself to be wrong, and any changes to the scheme need to be based on a more realistic view.

“The ball remains firmly in the court of UUK and vice-chancellors. They must do the right thing.”