Defined Benefit  

Southampton University to close pension scheme

Southampton University to close pension scheme

The University of Southampton is proposing to close its low-paid staff defined benefit (DB) pension scheme, which will leave a typical employee in mid-career with a pension two-thirds lower, unions have warned.

The Pension & Assurance Scheme for Non-Academic Staff (PASNAS), has 2,080 active members – which include cleaners, caterers, librarians, administrators, exams officers and other low-paid workers.

The university plans to close the final salary pension scheme at the end of July and move its members to a defined contribution (DC) scheme, trade unions Unison and Unite stated.

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A consultation on this matter started on Friday (12 January) and will run until 13 March 2018.

A similar change is being proposed to the university staff pension scheme - Universities Superannuation Scheme (USS) - the biggest private final salary plan in the UK. The deadline for negotiations relating this matter have been extended until 23 January 2018.

In December, Universities UK, which represents 350 university employers, announced plans to close down the USS DB section, and transform the scheme into a full DC fund.

Both unions – which represent about 700 support staff across the University of Southampton - have put forward an alternative paper, setting out why they believe the university's proposals are flawed.

They are offering to discuss a compromise suggestion, which would involve a move to a career average scheme, the unions said.

At the end of July 2017, the final salary scheme had a deficit of £104.5m, according to the university annual report.

The latest triennial actuarial valuation, conducted in July 2015, showed that the scheme had a 81 per cent funding ratio.

According to Ian Woodland, regional co-ordinating officer at Unite, there is no need for this final salary pension scheme to close.

Both unions say the plan to close the low-paid staff scheme should be viewed against the controversial pay package of a reported £433,000 for Sir Christopher Snowden, the university's vice-chancellor.

Adrian Dolby, Unison's University of Southampton steward, argued that morale is low across the university.

He said: "Staff are overworked and feel undervalued, while uncertainty over restructuring plans is adding to their stress levels. Now they hear their pension is under attack. This could be the final straw."

Acording to Mike Lacey, partner at Berkshire-based financial adviser firm Bowman Pension Consulting, this is a difficult case, due to the plans to close down the USS DB scheme, and have a fully DC structure for future service.

He said: “But members of the USS scheme are generally much better paid than members of PASNAS. Any cut will impact them harder than it would university lecturers and academics.

“PASNAS itself is in deficit – a reasonable 81% funding level at the last triennial valuation but this figure should now be improved, given the increase in the investment markets that the fund is exposed to. I can see a need to have broadly similar schemes for PASNAS and USS members, but is a pure DC arrangement really the best that can be offered?

“The problem is that once the DB link goes, there is zero chance that it will be reinstated. PASNAS members will be hit hard by a move to DC. The trustees of both schemes should consider delaying any decision until the results of the next funding review are published.”