Defined Benefit 

University wants government-backed pension solution

University wants government-backed pension solution

The vice-chancellor and president of the University of Warwick has asked for a government-backed solution for the Universities Superannuation Scheme afters plans to scrap this defined benefit (DB) plan were recently unveiled.

Professor Stuart Croft said, in a blog post to university staff, that “USS is now the largest remaining defined benefit scheme in the country not backed by government”.

He said: “I think we should also explore the possibility of obtaining government backing for the pension scheme and the possible benefits that might bring.

“A government backed scheme becomes an asset for the government, but provides vital underpinning for members.”

Earlier this month, Universities UK, which represents 350 university employers, announced plans to close down USS DB section, and transform the scheme in a full defined contribution (DC) fund.

A spokesman for Universities UK said: “This proposal would tackle the scheme's financial deficit and rising future costs whilst ensuring that it continues to offer attractive pensions benefits to members.”

The University and College Union (UCU), the trade union for higher education staff, is conducting a ballot between its members considering industrial action next year in face of this decision.

USS covers the majority of staff mainly in the older "pre-1992 universities" including Oxford, Cambridge, Manchester and Imperial.

There have been concerns about the scheme's £12.6bn deficit, with employers and members warned they may need to increase contributions by up to 7 per cent to maintain their current benefits.

But this is beyond what universities are willing to pay and Frank Field, chairman of the work and pensions select committee, has written to ministers, the pension regulator and the trustees of the scheme to understand why its deficit has increased £7.3bn in three years.

Mr Croft argued the decision to close the DB fund is based on “a more conservative approach to the [triennial] valuation” of the scheme by the trustees than before.

He added that if the scheme is closed, this “will greatly impact on a large number of colleagues in Warwick, as well as in other universities around the country”.

He said: “I can assure Warwick staff that we will reiterate our previous concern that the proposed de facto end to the DB scheme will require USS’s investment strategy to become increasingly cautious, which would materially inhibit the future growth of assets out of which pensions will ultimately be funded.”

The conclusions of the latest valuation have “very serious consequences for staff and for employers in the sector,” Mr Croft added.

He said: “We want to explore how we can get to a position where there is a threshold for the DB scheme which is workable and supports early career academics in particular.”

Mr Croft also said that Warwick University “will seek to work with any other interested parties to identify whether any alternative, more innovative, solutions may be feasible” for the staff pensions.