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The UCU dispute with the University of Sussex on USS & casualisation, inequality, workload and pay

Sussex UCU will present at a pre-Council meeting from 9:00-9:30am on Friday 26 November 2021. This is the accompanying UCU paper for the same meeting. We expect it will be available on the Council pages of Sussex Direct in the near future.

As Council is aware UCU is in dispute with the University of Sussex. The dispute letters to the (outgoing) Vice-Chancellor asked for assistance in seeking a resolution. As the dispute letters make clear, we are urging the University of Sussex, whose representative bodies are UCEA and UUK, to instruct their representatives to help to resolve these disputes.

The UCU demands of UCEA and UUK are reasonable, affordable and straightforward to implement. They would strengthen the University of Sussex’s strategic plan, they will lead to improvements in all areas of our work, including the University KPIs, staff wellbeing and the student experience. They will improve the international reputation of the entire sector.

In this paper we consider first the UCU dispute letters and demands. Then we cover the background on USS and on 4Fights, including details of incorrect and misleading statements made by UUK throughout consultations. We end by recommending that Council publicly call on UUK and UCEA to meet the reasonable requests of Sussex staff.

1. Letters to employers and demands

Sussex UCU asks that the University of Sussex publicly call on UCEA and UUK to meet the reasonable and easily achievable demands in the two dispute letters [1].

The letter to UCEA (on Four Fights), 8 November 2021, contains two demands

  • To improve their pay offer; and

  • To commit to meaningful agreements and action on casualisation, workload, and equality pay gaps.

The letter to UUK (on USS) 8 November 2021 calls on UUK to consult employers on:

  • Withdrawing their current un-agreed detrimental changes to members’ pensions;

  • Whether they would be prepared to pay higher contributions for fixed period of time to allow a negotiated settlement; and

  • To call publicly for a 2021 valuation.

2. Background on USS

Against the backdrop of repeated misleading statements from UUK, the UUK cuts to USS pensions, which are significant and which will impact most severely on the next generation of university staff, were voted through by JNC Chair’s vote on 31 August 2021.

UCU has since written to Bill Galvin, outlining a legal case relating to serious grounds for questioning the rationality and reasonableness of the decision-making of the trustee.

However, the March 2020 valuation has now been submitted to the Pensions Regulator (TPR), ahead of the legally required 60 day consultation with members. This valuation

  • Takes no account of post-valuation experience; and

  • Includes a ‘backstop’ with no benefit cuts

These points are important as the lack of post-valuation experience means there has been no consideration of the poor outcomes of the March 2020 valuation due to the shock of Covid. Further, the existence of the ‘backstop’, which is lower in cost for this financial year than the planned October 2021 rise in contributions, means there is a window to maintain full benefits for staff while negotiations continue and a new valuation is carried out.

2a. Views on the 2020 valuation

The following quotes support the widely held view that the 2020 valuation gives a highly pessimistic and misleading measure of the financial health of the scheme.

… more disturbance from striking academics. It is easy to condemn them, but I do not. They are the victims of unduly risk-averse decision making at the Universities Superannuation Scheme, under the influence of misconceived regulation. [Martin Wolfe, Chief Economics Commentator, Financial Times, 14 November 2021]

31 March 2020 was a poor date to carry out a valuation compared with market conditions at 31 March 2018. However, the position has since improved for most schemes. … Given the exceptional circumstances at 31 March 2020, there is a danger that too much can be read into the conclusions of a valuation at that date. [UUK Actuaries AON, April 2021]

I have taken no account of either adverse or beneficial outcomes that have become known to me since the effective date of the valuation. [USS Actuary, Submitted Schedule of Contributions to TPR for 2020 Valuation, August 2021]

The 2020 valuation methodology is described as ‘misleading’ and a ‘hall of mirrors’ by UUK’s actuary [AON report, April 2021]. The valuation is described by UUK as ‘unjustified’, ‘unnecessary’, and ‘unaffected by the evidence presented’ [public letter from UUK to USS, May 2021].

UUK stated that ‘we are particularly concerned about the influence of the Pensions Regulator on the USS Trustee’ and ‘we have seen little evidence to date that there is focus on your statutory objective’. [Letter to the Pensions Regulator, March 2021]

As illustrated in Figure 1 below the valuation date of March 2020 was an extreme low point due to the initial impact of the pandemic, with funding positions of DB schemes falling dramatically at March 2020, then recovering significantly.

Fig 1: graph from UUK’s actuarial firm AON’s report ‘USS valuation‘, April 2021, p 19, which shows which shows how the funding position of schemes set up on Aon’s Risk Analyzer (a web-based daily monitoring tool) has developed since 31 March 2018 up until 28 February 2021.

Figure 2 below shows the historic return on USS assets, relative to CPI; it also shows the ‘prudent’ assumptions for asset growth (dashed lines) for the last four valuations. The solid red line shows the prudent assumption for asset growth for the March 2020 valuation. The assets of USS were valued at £66.5bn at March 2020; they have since recovered sharply, being valued at £89.6bn as of August 2021.

Fig 2: ‘USS’s historic asset growth from reported investment returns: asset values plotted are relative to the value of assets as at 31 March 2020 (£66.5bn) adjusted for historic CPI. Dashed lines show forecast growth from discount rates for actuarial valuations in 2011, 2014, 2017 and 2018. The ‘2020 prudent assumptions for UUK proposal…’ uses the discount rate of the UUK proposal voted through the JNC in August 2021. All discount rates are prudent assumptions relative to USS’s CPI assumptions. Updated from Sam Marsh’s USSBrief 106

Figure 2 shows that the prudent assumptions for 2020 are both out of step with historic levels of prudence applied to USS and bear no correspondence to the actual asset growth.

As reported in the Financial Times

In the case of the USS, the right option is to make conservative, but not insanely pessimistic, assumptions and conclude that it is healthy. [Martin Wolf, Chief Economics Commentator, Financial Times, 27 June 2021]

We’d like to offer the reminder that USS refused UUK’s request to review the 2020 valuation and there has been no post-valuation experience in this valuation, which imposes a significant level of cuts to pensions under the UUK proposal.

2b. The level of cuts and the cost of maintaining benefits.

The UUK proposals to cut benefits have three parts

  • Reduction in accrual rate from 1/75 to 1/85

  • Cap on interest at CPI of 2.5% (currently capped at 5% plus half from 5%-10%)

  • Lowering of DB threshold from circa £60k to £40k

Since May 2021, UUK has issued consistently misleading statements on the level of cuts and the cost of maintaining benefits throughout UUK consultations.

Size of UUK proposed cuts including misleading statements from UUK

The USS modeller makes it clear that the reduction in future guaranteed pension income is significant.

Fig 3: Percentage cut to future earned DB as function of Year of Birth, checked against the USS consultation modeller run offline over large parameter range. CPI of 2.5%, using the USS assumptions for their consultation modeller, Data set, code and graphs.

Figure 3 shows the cuts to the future DB part of the pension as a function of Year of Birth using the assumptions of the USS modeller. The cuts range between 17% and 48% for CPI of 2.5%. If CPI is 3.5% the cuts range between 28% and 56%. The cuts hit the youngest and the next generation the hardest.

Next we consider the cuts to an individual and Figure 4 shows the cuts under the proposals to someone aged 40 on a £40k salary, from 6 months of contributions (April - October 2022) if CPI is projected to be 2.5%.

Fig 4: Current pension value and UUK proposed pension value from 6 months contribution, as per USS assumptions used in the USS modeller available with CPI at 2.5%. The cost of retaining benefits for the 6 months April-October 2022 someone on £40k salary is £240. The 12% cut is only the initial reduction in accrual rate. CPI is projected to be 2.5%, the cuts will be larger for higher CPI.

Figure 4 also serves to highlight that the following statement from UUK is misleading

...the UUK proposal would lead to a headline reduction of about 12% in future pension benefits (benefits earned prior to any change are secure and unaffected). Members would also receive a generous (by market standards) 20% DC contribution above the threshold. [USS Employers, 28 May 2021]

The UUK 12% figure was first used by USS Employers in response to the UCU Modeller on 28 May, and quoted in the Times Higher. On the same day Josephine Cumbo quoted UUK here, which makes clear that UUK understood that the CPI cap of 2.5% is ignored in their 12% claim. Yet the statement remained repeated and uncorrected throughout the UUK consultations as an example of how the UCU modeller misrepresented the level of cuts. The 12% cut can show to be only due to the cut in accrual as follows:

Percentage change = (1/85 - 1/75 ) / (1/75) x 100 = - 12%

As UCU stated in their dispute letter to Adam Tickell, 22 September 2021, the level of cuts to the future guaranteed pension for a typical member are 35%, and this reduced to cuts of 23% when the non-guaranteed DC is included

The UUK proposals will mean a USS member aged 37 earning £41,526 (the current starting salary for a lecturer in many institutions) can be expected to go on to build up an annual guaranteed pension of £12,170 if they continue to work full time in the sector until age 66. This compares with the £18,857 annual income which they would build up under the current arrangement. The same 35% cut would also apply to the guaranteed cash lump sum which the member would receive when they retire. Even when the expected extra cash is included into this member’s DC pension pot and then converted into USS DB pension, the cut from the UUK proposals remains at 23% of pension income.

UUK has consistently briefed against this estimate from UCU’s actuaries, with UUK’s Head of Pensions writing to UCU explicitly writing to VCs to say this statement is ‘untrue’.

It is not true, as UCU claims, that staff in the scheme are facing a cut in their pension of 35% or even 23% cuts if the DC pot is taken into account - based on modelling prepared for the USS JNC the impact will be a reduction of between 7% and 15% on future benefits for most members

Yet the USS modeller calculates, for the same typical path, values of 40% cuts to guaranteed future pension, which reduces to 29% when DC is included. Spreadsheet and discussion of results here. Thereby demonstrating that the UCU modeller, developed by UCU’s actuaries, and publicly available since May, along with the original statements by UCU, agrees with the USS modeller and correctly represents the level of cuts.

The cost of maintaining benefits via the backstop and UUK’s misleading statements

On 3 September, UUK made the following claims on the cost of maintaining benefits.

Without reform to the scheme, the contribution rates imposed by the USS Trustee would have hit the pockets of staff in USS through an initial 15% rise [2%] in October 2021, meaning a scheme member earning £40,000 would have had to pay an additional £47 each month [£7] to maintain pension benefits. They would have increased even further in April 2022, by £133 more per month [£47] for the same benefits – compared to current levels. [our emphasis, USS Employers 3 September 2021]

All of the figures in bold are incorrect [correct values are shown in square brackets] and significantly overstate the contribution costs as can be seen here.

Identical incorrect claims were repeated in the Press Release ‘Statement in respect of the proposed changes to the USS scheme’ by the Committee of University Chairs, 10 September 2021, again while the UUK consultation was open and University governing bodies were considering how to respond to the consultation.

At the same time, UUK also wrote to VCs with the following incorrect statements

...based upon modelling prepared for the USS JNC the impact will be a reduction of between 7% and 15% [21% in aggregate on actuarial calculation confirmed by UUK] on future benefits for most members, and without change staff could ultimately be facing a cut in their take home pay of approximately £1,600 [£560] a year for those earning around £40,000. [our emphasis]

Again all figures in bold are incorrect when compared to the AON Schedule of Contribution submitted to the Pensions Regulator at the end of August. We hope the examples above serve to demonstrate the reasons for the high levels of distrust of UUK with regard to both their statements on USS and the validity of their consultations.

2c. The cost to Sussex of retaining benefits

The cost of maintaining current benefits to the end of the University financial year would be less than was previously budgeted under the 2018 Schedule of Contribution October rises. As shown in Table 1 below, the budgeted increase in cost to Sussex of USS employers contributions for financial year 2020-2021 was £2.2m.

Under the backstop, retaining full benefits, the cost is £1m, less than half the amount budgeted and significantly below the £5-25m estimated as the cost of industrial action in Council’s risk register.

Table 1. cost under 2018 and 2020 valuation with and without benefit cuts. All data here.

It is clear these costs are affordable to the University up to October 2022 and that maintaining full benefits under the backstop until October 2022 would allow space for negotiation and a new valuation.

3. Background on Casualisation, Workload, Inequality and Pay

The Sussex institutional view that

Achieving equality, diversity and inclusion is fundamental to the success of the University of Sussex. We aspire not just to reduce inequalities in outcomes for individuals, but to use our expertise, commitment and courage to challenge the status quo. [Inclusive Sussex, 2018]

is in complete alignment with the views of Sussex UCU and there is a genuine commitment from our branch to continue to work collegially and strategically, with UEG and Council, across these areas for the benefit of the whole community. However, we note with disappointment that many of the measures of success, as detailed in Inclusive Sussex, including Council KPIs, are consistently missing targets.

We recognise the successful and productive work at a local level through joint negotiating to improve the conditions and job security of serially casualised staff. We also recognise the vital importance of grassroots movements, including the broad coalition of staff and students whose work led to the Racial Justice letter to UEG. We recognise and welcome the subsequent work by outgoing Interim PVC for EDI, Kevin Hylton, in working collaboratively to announce that University of Sussex seeks to be antiracist and how that position will develop.

However, it's clear to us that national frameworks for accountability are needed to both support this local work and to improve the contractual conditions of all. This is particularly important in a sector where movement between institutions is frequent and where under-represented groups are most vulnerable to the inequalities associated with this movement and precarity. If it falls to underrepresented grassroots groups to carry out the invisible work associated with local progress, then we will never achieve the systematic change that is needed.

We now work in a sector where ‘just in time’ methods of employment remain endemic and this is not something we can address locally. Employers collectively need to commit to change this – and they need to be held accountable for this change. Poor working conditions cannot continue to be an accepted side effect of last-minute planning processes: stable and secure working conditions, and manageable workloads, must be a priority in all university planning, including at the very highest levels. This requires the national coordination of a sustainable sector where securely employed staff are able to provide the best learning experience and efficient and sustainable running of the institution.

As the UCU PostGraduate Researchers as Staff Manifesto makes clear,

We put our lives on hold, without access to funded child care entitlements, parental and adoption leave, state benefits, pensions or housing stability.

As such, early career researchers are suffering the most from the erosion of academic working conditions. This is not a sustainable way of working, and as PGRs work at DTs this in turn impacts on students' learning and therefore NSS scores.

As the report and claim by the Joint Negotiating Committee for Higher Education Staff details, pay has fallen by 17% in real terms over 12 years. The pay freeze during covid and the most recent below-inflation level of pay continue the downward erosion of working conditions in the sector.

Sussex can afford to invest in staff, and the JNCHES claim aimed to address rising inequality with a rebalancing of the pay spine, an approach that was ignored in the 1.5% pay offer. The cost to Sussex of improving the pay offer by 1.0% would be less than £1.7million a year. This is clearly affordable given that the annual income of the University is around £350million and that surpluses were £12.7m in 2020 and £23.4m in 2019.

We believe that it is only by working nationally as a sector and locally, as a leading University, that the conditions of Higher Education Institutions can be made equitable, inclusive, and sustainable.

4. Recommendation

The Council position on USS is

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. [Sussex Council response to consultation, 24 May 2021]

Yet the UUK proposal for cuts to future service benefits are clearly and visibly not the best that can be achieved against appropriate assumptions.

The demands on 4Fights is simply for improvement on pay and for meaningful agreement and actions on the areas of work that Council is actively trying to improve. We do not understand how such demands would not be welcomed.

We recommend that Council publicly calls on the representative bodies UUK and UCEA to meet the UCU demands.

Prepared by Sussex UCU Exec and Reps, 24 November 2021

[1] The original dispute letters to VCs on 4 Fights and USS included further details.

This paper is the result of work by the Sussex UCU Exec and Reps and the Sussex and IDS Pensions Working Group. It is informed by the feedback received from across campus including non-UCU members and students.

Photo Credit: DENAN Production

Appendix: timeline of UUK and Sussex statements and consultations

24 September 2020. UUK launched a one month consultation with all employers on the USS proposal for the 2020 valuation. Staff still do not have access to the University’s response. Chair of Council’s news item reported that the University response was ‘rightly confidential’ and ‘relatively uncontroversial’. Sussex UCU wrote to UUK to raise objections to this confidentiality and confirm that the 2020 valuation was highly controversial, response and details here.

10 March 2021 UUK requested a review of valuation

29 March 2021 USS refused the request for a review

7 April 2021 UUK proceeded with second eight week consultation

7 May 2021, Sussex UCU view is presented to Council as a paper. Sussex University submits response to the consultation, this is now available on Sussex Direct as Council Paper C-258-4a UUK Consultation response Final. Sussex Council provide qualified support for the UUK proposals as ‘basis for negotiation’, called for less prudent assumptions, governance review and 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.

28 May 2021, UUK starts to issue and repeat misleading statements about the level of benefit cuts, claiming 12% by ignoring the CPI cap. These claims are repeated in consultation documentation, and remain uncorrected, they are repeated in the national press. See details here.

18 June 2021, UUK opens 2 week tick box consultation. Sussex response not shared, but Chair of Council reports that Council responded with Option A, to impose the UUK benefit cuts.

31 August 2021 JNC votes through by UUK and independent chair the UUK proposal that includes a Schedule of Contribution with backstop of lower costs to maintain full benefits.

3 September 2021, UUK starts to issue and repeat misleading statements inflating the increase in contributions if the UUK proposal is not imposed along with further misleading statements underplaying the level of cuts. See details here.

6 September 2021, UUK opens 2 week consultation

10 September 2021, Committee of University Chairs repeats incorrect statements by UUK on cost of maintaining full benefits in press release ‘Statement in respect of the proposed changes to the USS scheme

16 September, Council is not consulted on the UUK consultation, but UEG agreed a response. See University of Sussex comment on USS documents [PDF 98KB] [login required]

20 September 2021, UUK consultation closes

22 September UCU write to Adam Tickell as VC to declare a dispute with Sussex, restating the level of cuts to the guaranteed pension for a typical member are 35%, and 23% when DC is included

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