top of page

On support for the UCU proposals

Sussex UCU will present to Council on Friday 18 February 2022.

This is the accompanying paper, prepared on behalf of Sussex UCU

Note added 3 March 2021: this paper is now also available on Sussex Direct [login required]

Executive summary

The UCU proposals are:

  • Affordable. They have lower employer contribution rates on average than the Teachers Pension Scheme for the period October 2021- April 2023. They operate well within the financial cushions of the University.

  • Excellent value for money. The proposals avoid the low value UUK proposals. The call for a 2022 valuation will ensure the latest asset values are accounted for in pricing of future benefits.

  • Timed. They work within a fixed time-frame, and will facilitate long-term progress to a sustainable solution built on trust and collaboration.

  • Implementable. The proposals have been confirmed as implementable and viable by the USS Trustee, and by implication the Trustee considers that they will fall within the approval range of the Pensions Regulator.

Council support for the UCU Proposals would help maintain a sustainable and exemplary pension scheme, bringing about a resolution of a long-term dispute, benefiting employers, staff, and students.

Dear Chair of Council and Councillors,

Thank you for giving us this chance to present the UCU proposals at the Council meeting on Friday 18 February.

The UCU proposals have been costed and qualified as viable and implementable by the USS Trustee.

As we hope to demonstrate with robust evidence today, the UCU proposals are in the best interests of employers and employees. They are reasonable, affordable and practical. They operate within the 2020 valuation. They offer significantly better value-for-money than the UUK proposals. They prevent losses of hundreds of thousands of pounds to Sussex staff pensions. They avert the huge shift in intergenerational inequality that the UUK proposals would impose. They avoid the multi-year cost-escalator of the fallback position of the 2020 valuation. They seek a collaborative, evidence-based, pragmatic and compromising approach to ensuring the long-term sustainability of the scheme.

Staff and students at Sussex would welcome Council’s public support for the UCU proposals. Such public support would clearly signal a desire for a progressive approach to the challenges of USS based on trust, transparency and evidence.

We are asking the University of Sussex Council to support the UCU proposals in full, in their response to the USS Employers formal consultation. The UCU proposals are

1. That UUK call on USS to issue a moderately prudent, evidence-based valuation of the financial health of the scheme as at 31 March 2022, to be issued for consultation in June (at the latest).

2. That employers agree to provide the same level of covenant support as for their own proposals to facilitate a cost-sharing of current benefits throughout the 2022/23 scheme year, starting 1 April 2022 at 11% member/23.7% employer until 1 October 2022, and 11.8%/25.2% thereafter.

3. That employers agree to pay a maximum 25.2% and members a maximum of 9.8% from 1 April 2023 so as to secure current benefits or, if not possible, the best achievable as a result of the call on USS to issue a moderately prudent, evidence-based valuation.

In the following we address concerns Council may have around: 1) Increases in contribution rates, 2) Timing and post-April 2023 and 3) The outcome of a 2022 valuation, tPR and USS.

We welcome follow up questions. Please email Sussex UCU Pensions Officer Jackie Grant

1. Increased contribution rates

Council’s response to the USS consultation of May 2021 stated that the contributions were at the maximum sustainable levels on the grounds of concern about opt-outs and the setting of a longer-term baseline.

The Employer contribution rates under the UCU proposals are lower on average than the Teachers Pension Scheme (TPS) rates of 23.7% for the period October 2021- April 2023. TPS is in operation at most post-92 institutions.

Although the USS Employers’ consultation stated ‘We have seen clear evidence presented to the JNC that further increases in the member contribution rate will almost certainly mean that more members will be priced out of the scheme’, no such evidence has been provided in any public consultations to date.

Here we put aside, but note, the point that affordability is related to pay as well as the price of the pension. We make four observations on opt-outs to reassure Council that temporarily increasing the contributions, in line with the UCU proposals, is in the best interests of all employers and employees.

1. Sussex and IDS UCU branches have locally emailed all UCU members. We have asked anyone who is concerned they may be forced to opt out due to UCU proposals’ contribution rates to get in touch to discuss if a mutual aid scheme can be arranged. We have yet to have a single person contact us with such concerns.

2. Data from USS annual reports, plotted below, shows that opt-out rates appear to be declining as contribution rates increase. Noting that increases in opt-outs occurred during periods of major cuts to benefits, it is not unreasonable to consider that significantly cutting benefits will cause opt-outs in a way that a temporary increase to Employee contributions will not.

Figure 1: USS non-participation data from USS annual reports, along with contribution rate, see data here.

3. USS data on the reasons for opt-out present a complex picture. As Fig 2 shows, while 27% of respondents cite temporary affordability as a reason for opting out, concerns about accessing benefits overseas, and contract type, or future plans also rank highly.

Figure 2: Infographic from USS employees opt out survey January - March 2019, from Employers newsletter.

4. Responses to the USS statutory consultation that closed on 17 January align very strongly with the UCU proposal. In particular, respondents ranked increased contributions over all other options in the answer to Question 5 on ways to address the increased cost of benefits. From conversations with colleagues we believe the picture is the same locally at Sussex. The branch has requested the local data for the ranking of Question 5 of the USS consultation, and is awaiting confirmation of this data.

Finally, on the costs to Sussex. The temporary increase in Employers contribution would cost Sussex ~£3m more than the cost of the UUK proposals from now to April 2023. This is £1.8m more than planned for the same period in the provisional budget of the Financial Year 2021/22, which anticipated the now-cancelled rise of contribution rates in October 2021. This is about £780 per USS member at Sussex, to prevent cuts of 35% or more to pensions for those starting their careers.

This £1.8m investment would prevent a loss in current Sussex staff pensions of £8-10 million.

2. Timing and post-April 2023

The first part of the UCU proposals calls for a 2022 valuation to be issued for consultation in June. A June consultation would be followed by JNC negotiations up to September, in order to meet the April 2023 deadline. This is a tight timeframe, but it is not unprecedented. Both the 2017 and 2018 consultations were issued in similar time frames. See Mike Otsuka Section 2: on the timing of a new valuation for further details.

Concern has been expressed by Council in their previous response that a temporary increase in contributions from Employers will set a new baseline. Point 3 of the UCU proposals, that sets a time limit to April 2023, specifically addresses this concern. Point 3 imposes 25.2% as maximum for Employers and 9.8% as maximum for Employees from 1 April 2023.

Further, point 3 also gives space for the consideration of benefit reforms.

In terms of the practicalities of point 3, UCU negotiators have openly discussed options including a Memorandum of Understanding between UUK and UCU to confirm point 3. Alternatively, an arrangement could be established whereby UCU and UUK and the Chair of the JNC agree to point 3 before 28 February, then at any future point in negotiations there is only the need for the Chair and one party to be in agreement for the JNC to implement point 3. These are both straightforward solutions.

There is a further point to note: we are offering the trust and collegiality to hold our union to this collective promise. If the proposals are to be implemented it is likely that UCU would ballot members on the proposals, and Sussex UCU, as a branch, would almost certainly publicly ask members to strongly support all points of the proposals including Point 3.

3. The outcome of a 2022 valuation

A 2022 valuation is overwhelmingly in the best interests of employers and employees.

Council’s USS response in May 2021 stated:

It is vital that UUK use this opportunity to encourage the trustee to be less prudent in the assumption set and recovery plan required.

Council also stated:

It must be clear and visible in the public domain that any final recommendation for future service benefits/contributions is the best that can be achieved against appropriate assumptions.

The UCU Proposals supports these views of Council by asking UUK to join UCU in calling for a moderately-prudent, evidence-based 2022 valuation.

While we acknowledge that the Pensions Regulator has previously expressed concerns about the risks of the scheme, the USS Trustee has confirmed the UCU proposals are implementable and viable.

Further, it is clear that the funding position has improved drastically since the Covid-dip of March 2020. Using USS’s own data and methodology (a methodology described by Martin Wolf, chief economics commentator in the Financial Times as ‘insanely pessimistic’) the scheme would have reported surpluses of between £2 and £5 billion in October, November and December of 2021.[Calcs of surpluses and break-even discount rates].

This improvement in funding is part of a large picture of year-on-year improvement in funding since the ending of the Final Salary scheme in 2011; this can be clearly seen in Figure 3. The dashed lines show the break-even discount rates, that is the rates of asset growth that would give a 100% fully funded scheme, for each valuation since 2011.

The latest asset projections for a fully funded scheme December 2021 is given by the solid red line and is CPI-0.23%.

Figure 3: Break-even or 100% fully funded rates of USS from 2011 to December 2021. The latest figures are confirmed as in good agreement with USS data by UCU negotiators. All calculations use USS data and methodology.

Further points regarding the outcome of a moderately prudent, evidence-based 2020 valuation can be found in Mike Otsuka’s Section 1: the case for a 2020 valuation.

In summary

Based on the exceptionally poor outcome of the 2020 valuation, the UUK proposals would result in a pension scheme which is a singularly poor investment for universities wanting to recruit and retain highly skilled and motivated staff.

Council has the opportunity to temporarily maintain USS benefits at an affordable rate, that provides excellent value for money. This short window will allow for a new valuation that should show a dramatic improvement in funding even with the current methodology used by the USS Trustee.

A governance review of the USS Trustee and Executive would also be helpful in building trust and alongside a base for the continuing collaborative work between UUK and UCU on low-cost options and the exploration of Conditional Indexation.

Council’s support of the UCU proposals would be welcomed by staff and students alike. It would signal a joint determination to end the many years of protracted industrial action at Sussex.


Commenting has been turned off.
bottom of page