Universities UK, which represents 350 higher education employers, has proposed switching its members who are accruing defined benefit savings under the £60.5 billion ($80.1 billion) Universities Superannuation Scheme (USS) to defined contribution accounts.
It said members would retain the benefits they earned under the defined benefit plan, but any further savings would be made on a defined contribution basis.
USS, one of the largest private pension plans in the UK, provides pensions for academic and other university staff. Universities UK said difficult economic circumstances have resulted in an increased deficit, and an increase in the cost of future defined pension benefits of more than one-third since 2014.
“The costs of USS need to be controlled to ensure the scheme remains sustainable and secure for the long-term,” said Alistair Jarvis, chief executive of Universities UK, in a release. “Change is needed to address the scheme’s deficit and the rising cost of future pensions. Our proposals for reform will tackle the scheme’s funding challenges so that universities can continue to offer attractive pensions benefits to staff.”
Universities UK said its proposal is the result of consultation with employers responsible for 92% of USS active plan members.
However, The University and College Union (UCU), which represents more than 110,000 higher education employees, has balked at the proposal, and has warned the move would create chaos in universities.
“After months of negotiations, these plans are a bolt from the blue and would effectively destroy the USS scheme,” said UCU general secretary Sally Hunt in a statement. “It is categorically the worst proposal I have received from universities on any issue in 20 years of representing university staff,” she said, adding that “these plans would remove members’ guarantees in retirement, and leave them facing years of stress about whether their pension investments are returning enough income to live on.”
The union cited a study by financial advisors Tilney that estimated that a defined contribution plan would lead to a final pension worth only around 20% of the best defined benefit plans, given the same lifetime contributions.
UCU said it will ask its members to back industrial action aimed at “a substantial disruption” of approximately 50 of the largest and most well-known universities in the UK, including Oxford, Cambridge, Imperial, and Manchester. The action will include a series of strikes during February, as well as other measures such as refusing to cover or reschedule classes, or cover for sick colleagues.
Universities UK said the threat of industrial action by UCU “is premature and disappointing, as there is an agreed series of imminent meetings between UUK and UCU to discuss USS pension benefit reform.”
USS is the principal plan for academic and comparable staff in UK universities and other higher education and research institutions. The plan provides benefits to members with employers contributing 18% of salary and members 8%.