Pension proposals by Universities UK risk creating a two-tier superannuation scheme that could mean a typical member loses 35 per cent of their guaranteed retirement benefits.
This is the stark warning made by the University and College Union, which has claimed the UUK's proposed Universities Superannuation Scheme changes would "devastate" the finances of university staff.
The union said this would especially affect "workers at the start of their career, and risk collapsing the scheme entirely".
The USS pension scheme, which covers 460,000 people, is conducting a 2020 valuation and claiming that contribution rates – currently at 9.6 per cent for members and 21.1 per cent for employers – need to increase.
UCU and their advisers, First Actuarial, have argued that increases relating to the 2020 valuation are not justified.
However, the UUK has proposed major changes and cuts to the guaranteed defined benefit element of the USS to keep contributions at their current rate.
UUK’s proposals include:
- Lowering the salary threshold where defined benefit accrual stops from £59,883.65 to £40,000
- Reducing accrual (and therefore the size of payments in retirement) from 1/75 to 1/85
- Imposing a consumer price indexation cap of 2.5 per cent. UCU claimed this removed the protection of benefits against any inflation above that level)
Jo Grady, general secretary of the union, said: "Reducing the level and the security of benefits will pull the rug from under people’s retirement and threaten the viability of the entire scheme as people question why they should remain a part of it.
"University staff have had their pay held down by employers for years; they will not stand for USS and UUK colluding to slash their pensions. In the coming days members will formally decide the next steps in the union’s campaign to defend USS pensions.
"Should USS and UUK continue down their current path, we cannot rule out industrial action."
On May 28, First Actuarial's new USS pension modelling tool came into use. The tool allows members and potential members of USS to see the impact UUK’s proposals would have on their defined benefits.
For a typical USS member, it shows a cut of over two-thirds (35 per cent) to defined benefits that will be accrued in the future.
UCU says this would drastically reduce the guaranteed retirement income of members of USS, hitting those at the beginning of their careers hardest, who are more likely to be on casualised contracts, on lower pay, have substantial student debt, and have fewer assets.
The union said this would create a two-tier work force and was particularly ‘galling’ when UUK is proposing not to increase employers’ contributions to the scheme.
Grady added: "Our modeller shows the impact of UUK’s proposals falls particularly hard on those at the start of their careers, who are more likely to be on low pay, and on casualised contracts.
"It is incredible that USS and UUK are trumpeting these proposals without providing any meaningful information about the impact on staff. The plans would further cement a two-tier workforce."
A UUK spokesperson said: “Employers would be very willing to consider alternative, feasible and affordable proposals from the UCU to tackle the scheme’s financial challenges – so far the union hasn’t put forward any possible solution. Unfortunately, no change is not a viable option.