The proposal to close the Universities Superannuation Scheme (USS), the biggest private defined benefit (DB) scheme in the country, could leave staff £200,000 worse off in retirement.
This is the conclusion of an analysis conducted by First Actuarial, which compared the pension of a lecturer starting work today under the new proposals for the scheme.
According to the analysis, lecturers who started working in 2007 and have 10 years of service will lose out on £131,000, a loss of £6,100 annually, while staff with 20 years of service could lose out on £35,000 in total by the time they retire in 2027.
The research also shows that lecturers would be £385,000 worse off than if they worked in post-1992 universities, or polytechnics, where academics’ pensions are paid by the rival Teachers’ Pension Scheme (TPS) rather than USS.
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.”
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.
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.
The postal ballot opened on Wednesday (29 November) and will close on 19 January.
Sally Hunt, UCU’s general secretary, argued that the analysis reveals “just how damaging UUK’s hardline plans for the pension scheme would be on an individual basis for people who have planned and saved for their retirement”.
She said: “Already offering worse benefits than other schemes available in the sector, these proposals would devastate USS members’ pensions and could create a recruitment and retention crisis as staff jump ship to secure their futures.
“I would urge all members to take a look at what these proposals would mean for them and then make sure they vote in the ballot for industrial action.”
According to Alistair Cunningham, financial planning director at Surrey-based Wingate Financial Planning, if USS members “feel like getting angry they should look to the trustees of the USS, rather than the universities,” since “the reason they are in this position is not solely the fault of the universities, but also how the fund has been run”.