Universities UK (UUK) and University College Union (UCU) have agreed to reverse the 35% cut made to the industry’s Universities Superannuation Scheme (USS) pension and restore what has been lost.
In a joint statement published today, UUK and UCU agreed to full benefit restoration to pre-April 2022 levels by Monday 1 April 2024, which is worth between £15bn and £17bn, as well as an additional one-off pension payment of around £900m to help make good the money members have lost since April 2022.
The agreement is said to pave the way for new contribution rates to be introduced as soon as January.
The scheme trustee has estimated total contribution rates need to be 20.6% for benefits to be restored. This will likely bring employee contributions rates down from 9.8% to 6.1% with a decision by the USS trustee board expected in November.
The trustee has shown it is sustainable to keep the new contribution rates and improved benefits for at least two valuation cycles.
UUK and UCU also committed to continuing to work together to ensure the stability of benefits and contributions at future valuations, according to the statement. They said this will likely be done through the stability working group that UCU, UUK and the scheme trustee jointly sit on.
UCU’s higher education committee will vote on whether to ratify the agreement tomorrow, which is then subject to an ongoing consultation of scheme members and proposals that will be submitted to the USS Joint Negotiating Committee on 30 October 2023.
Strikes
UCU members have taken a total of 69 days of strike action in defence of their USS pensions since 2018. This includes 14 days of strike action in 2018 over threats to close the defined benefit element of the scheme and 55 days since 2019 over contribution increases and benefit cuts.
UCU general secretary Jo Grady said: “Four years ago our members were told that winning back their pension was an impossible task. When standing for election, I made it clear that it was only by the whole union pulling together and never giving up that we would win this dispute. Many doubted us.”
She said that today was a “historic” moment for UCU members.
“This is just the start for our union. We have pension justice. We now move on to delivering justice on pay and job security. We will not stop until we create a higher education sector that properly values its staff,” she noted.
Vivienne Stern, chief executive officer of Universities UK, said: “We are delighted to have been able to agree on an outcome for the 2023 USS valuation which will be good for all members of the UK’s largest private pension scheme, and which will bring down costs for both members and employers.”
Stern said that this has been possible largely as a result of dramatic changes in economic conditions since the last valuation, including high interest rates, combined with the commitment from employers for additional financial backing – or covenant support.
She added: “When the scheme was in deficit in the past, we took steps to stabilise it. Now that it is in better shape, we are pleased that we can agree to pass on the benefits of the improved position through lower contributions and improved benefits.”
She also noted that it was “vitally important” to stabilise the scheme to avoid future fluctuations in its fortunes.
“The projected surplus in the scheme is an important protection, but we need to continue to work, with renewed momentum, towards arrangements which will provide longer term stability,” Stern said.
USS welcomes agreement
A spokesperson for the USS welcomed the agreement between UUK and UCU and their ongoing commitment to consider the future stability of the scheme over the long term.
The USS spokesperson said: “From the outset, we stated our collective ambition was to complete the 2023 valuation under an accelerated timetable – and we look forward to working with UUK and UCU representatives on the Joint Negotiating Committee, and wider stakeholders, on how to achieve the further acceleration of the timetable indicated in the joint statement.”
The spokesperson added that the trustee consultation with the UUK on the proposed funding assumptions and methodology for the 2023 valuation closed at the end of September and currently UUS is considering the responses received.
“A statutory employer-led consultation with affected employees (and their representatives) on potential benefit changes is already underway and is due to run until late November. Final decisions will follow thereafter,” the spokesperson said.
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