University staff will see their salary contributions to the Universities Superannuation Scheme (USS) increase by 3.7 percentage points to 11.7 per cent by 2020, according to new proposals announced yesterday (25 July).
The scheme, which provides pensions for almost 419,000 members across 350 universities in the UK, is also proposing an increase in contributions from employers – from 18 per cent to 24.9 per cent.
The scheme will run a 60-day statutory consultation, where employers and affected scheme members can share their views on this proposal.
| Current contribution | From 1 April 2019 | From 1 October 2019 | From 1 April 2020 |
Member rate* | 8% | 8.8% | 10.4% | 11.7% |
Employer rate* | 18% | 19.5% | 22.5% | 24.9% |
* of salary
USS is the largest private sector pension scheme in the country.
Its 2017 valuation estimated the scheme needs an extra £900m a year in contributions from members and employers to continue to offer the current level of benefits in future, and to ensure benefits already earned are funded in full.
USS has a defined benefit (DB) as well as a defined contribution section, but was due to become a fully defined contribution fund under plans published in November by Universities UK (UUK), which represents the scheme sponsors.
According to the scheme's annual report, it had a deficit of £12.6bn at the end of March 2017, which would be reduced by £6.1bn after the implementation of the UUK reform proposals.
This shortfall stood at £12.1bn at the end of March 2018, according to the USS annual report also released yesterday.
In January, the University and College Union (UCU) announced 14 days of strikes across 61 universities to start on 22 February and run over a four-week period.
In April, members of the scheme voted to accept proposals which included a guarantee that the DB element of the scheme would be maintained, while a joint-expert panel considers the valuation of the pension fund.
To achieve the extra £900m needed, the combined contribution from employers and members would need to increase by 11.4 percentage points of salary, from 26 per cent today to 37.4 per cent.
Under the proposal, the 1 per cent employer match to the USS Investment Builder – an optional section in the pension plan - would be discontinued, reducing the overall contribution rate required from 37.4 per cent of salary to 36.6 per cent.
Subject to consultation, in accordance with the scheme rules, the increase will be shared between members and employers on a 35:65 basis, USS said.
The scheme is making these changes to the contributions since the Joint Negotiating Committee (JNC), a body made up of equal numbers of UUK and UCU representatives, hasn’t been able to decide on a way to respond to this increase.
Bill Galvin, USS group chief executive, said scheme officials "fully appreciate the impact that the cost sharing proposal will have," and are hopeful that stakeholder representatives "can agree a way forward as soon as possible".
He said: "To that end, we have engaged constructively and openly with UCU and UUK’s joint expert panel and await its report on the valuation later this year."
maria.espadinha@ft.com
