USS deal pushed through as unions threaten more strikes

The University and College Union has warned of more strike ballots, and possibly even a marking boycott, after employers’ proposals were pushed through by a deciding vote from the chair of the USS Joint Negotiating Committee.

The dispute between employers, the USS trustee, and the University and College Union has been a protracted one. 

The USS trustee initially responded to the 2020 valuation — which showed the scheme deficit quadrupling to more than £14bn — with a proposed schedule that would see contribution rates rise to as much as 56.2 per cent of payroll.

This is a deplorable attack which our members won’t take lying down. If these so-called leaders of higher education thought this was the end of this dispute, they have another thing coming

Jo Grady, UCU

Employer group Universities UK then presented an alternative solution, pledging greater covenant support and a moratorium on scheme exits in exchange for limiting the rate increases to 9.8 per cent for members and 21.4 per cent for employers.

This was rejected by the UCU, which successfully balloted for strike action — still ongoing — while proposing its own alternative proposals, under which member contributions would be set 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”.

The UCU has long been critical of the timing of and methodology used in the 2020 valuation, which it said was overly prudent and took place at the low point of the Covid-19 pandemic. It has pointed to subsequent improvements in the scheme’s financial position — assets have now recovered to their pre-pandemic levels — as a reason to hold a new valuation, though the USS trustee has countered that improved asset performance has been offset by rising costs.

UUK issued a short consultation on the union’s proposals, and more than 90 per cent of its members rejected them.

The USS trustee had until the end of February to submit a schedule of contributions to the regulator. Without a deal in place, it would have had no choice but to revert to contribution rates both employers and the union have said are unaffordable.

Employers’ proposals agreed

On February 22, the JNC formally voted in favour of UUK’s proposals, amended to delay the introduction of an inflation cap at the expense of slightly larger rate rises than initially proposed.

Under the agreed deal, member contributions will rise to 9.8 per cent of salary and employer contributions to 21.6 per cent from April 1, representing a 0.2 per cent and 0.8 per cent increase respectively.

Scheme members earning up to £40,000 a year will see their benefits accrue more slowly, the accrual rate having been reduced from 1/75 to 1/85, while the salary threshold under which benefits are built up will be reduced from £60,000 to £40,000. Members above this threshold will get a 20 per cent contribution to their defined contribution pot, as is currently the arrangement for those earning more than £60,000.

The rate rises are in addition to the £1.3bn in covenant support previously agreed by employers.

A UUK spokesperson said: “The JNC decision secures an affordable solution to the 2020 valuation and provides a more sustainable platform on which the scheme’s longer-term future can be built. This settlement ensures the continuation of a valuable defined benefit element to the pensions offer, while sparing both members and employers from the damaging consequences of much higher contributions from April.

“Employers would rather the scheme was in a financial position where benefit reform was not necessary. However, without these reforms costs would have risen to unaffordable levels for employers, while the increased costs for members would have seen more people leave the scheme and miss out on a valuable employer contribution towards their retirement.”

They added that focus should now shift to working on “alternative scheme designs, a review of the scheme’s governance, and developing lower-cost options and flexibility to give members more choice in their retirement saving”.

“Too many members of staff are currently choosing not to participate in the USS because the contribution rate is too high, or the scheme benefits are not considered suitable. With these reforms enacted, we have a chance to identify improvements and restore all members’ confidence in their pension arrangements at an affordable price,” the spokesperson said.

There may be trouble ahead

Though the threat of rate rises may have abated, recriminations are ongoing, with the UCU warning on February 22 that the dispute is “far from over”.

It warned universities to expect more industrial action, including a marking and assessment boycott, in response to an agreement it characterised as a “package of cuts”.

It reiterated that a “typical lecturer” will see benefit cuts of 35 per cent under the agreed deal, and warned that, for some, that figure could be as high as 41 per cent.

Though the inflation cap initially proposed by employers has been delayed, the union likewise warned that its implementation in 2025 will see pensions “further eroded as inflation continues to rise”.

The union again attacked the basis on which the 2020 valuation was conducted, pointing out that scheme assets have since rebounded by £22.5bn to £89.3bn, while the deficit had shrunk by 80 per cent.

UCU general secretary Jo Grady said: “This is a deplorable attack which our members won’t take lying down. If these so-called leaders of higher education thought this was the end of this dispute, they have another thing coming.

“UCU tried repeatedly to reach a compromise in negotiations, but employers refused even the most modest increases in contributions, instead opting to slash the benefits of staff while hoarding billions in reserves. UCU’s compromise proposals, which represented the best route out of this dispute, were rejected by employers and the JNC chair.

“On [February 25] our union will discuss and decide the next steps in this dispute, and that will include reballoting and escalation towards a marking and assessment boycott.”