Yesterday a new proposal emerged from UUK for the immediate future of USS, which UUK clearly hopes will be sufficient to resolve the current dispute and end the ongoing industrial action in UK universities. At the heart of the proposal is the convening of a joint expert panel, with equal numbers of UCU and UUK nominees and a jointly agreed non-voting chair, to review the basis of the scheme valuation.
It is promised that the panel will bear in mind the distinctive nature of the Higher Education sector and the effect of pension reforms on other inequalities, and that it will take a fair and balanced approach to decisions about risk. The panel’s work, we are told, will “reflect” the clear commitment to defined benefits evident among scheme members, and any changes to contributions and benefits will remain “broadly comparable with current arrangements”. Comparability with the Teachers’ Pension Scheme currently used in post-1992 universities will be discussed, as will the role of government and several other related issues. In the meantime, the current scheme of benefits and contributions will be maintained until at least April 2019.
On the face of it, this sounds like a promising offer. Four weeks of determined strike action by UCU members have forced UUK to acknowledge that the valuation process so far has been both arbitrary and inept, and that its conclusions carry no confidence. UUK has been brought to accept that the valuation of the scheme’s assets and liabilities, and the identification of any deficit or surplus in the funding level, is too complex and important to be done without full transparency and proper employee representation. The recognition that any changes to benefits must follow rather than precede a reliable valuation is both welcome and overdue.
But when one inspects the details, there is much that is deeply troubling. The first is that “the maintenance of the status quo in respect of both contributions into USS and current pension benefits, until at least April 2019” is no concession at all: even the JNC decision to introduce 100% Defined Contribution was only to be implemented in April of next year, and this would be true of any changes made in the current valution cycle. It does not inspire trust to see this presented as a major concession.
More important, though, is the absence of proper engagement with two crucial problems. The first is that any changes in the scheme valuation must be made not by UUK or UCU, but by the USS Trustee, and the second is that any valuation (and accompanying set of reforms) which cannot be settled by June 30th of this year would require the Pension Regulator to extend a deadline it has made clear it cannot move, or at least to tolerate the deadline being missed. The failure of the Acas agreement to move beyond the November valuation was the result of resistance as much from USS and tPR as from UUK. There are therefore strong grounds here for thinking UUK is making promises it knows it lacks the power to keep.
This raises the question of what the fallback option is, should the USS trustee say that that it is not up to UUK how it values the scheme, or tPR say that a decision on amended benefits and contributions still has to be made by June 30th (which would mean on the basis of the November valuation). There are roughly three possibilities. The first is to maintain something like current benefits, but increase employee contributions by around 50%. (This is the no-deal scenario under the Scheme rules.) The second is to adopt something like the Acas deal, which makes massive cuts to benefits in order to keep contribution rates down. The third is to impose the employers’ original all-DC plan. Nothing beyond these three alternatives could satisfy the Pensions Regulator while the November valuation remains the basis for discussion, and there is no possibility of the new panel reporting in time for a new valuation to underlie a decision by June 30th.
Which of the three alternatives is most likely? As well as an increase in employee contributions to around 12%, the first option would require an increase in employer contributions from the current 18% to around 25% of salaries. UUK has previously made clear that employers consider such an increase unaffordable, and for a considerable number it probably genuinely is. It is therefore hard to see it happening. The second option reproduces more or less precisely the Acas proposal: that offer itself included the convening of an expert panel and the maintenance of current benefits until April 2019, so if the Acas terms are the default then the new proposal is little more than Acas with some pages missing. It’s hard to see this as an attractive offer to USS members.
That leaves the third alternative: reversion to the January 23 decision to impose the lowering of the defined beneft threshold to zero, and thereby make USS a 100% Defined Contribution scheme from April 2019, at least until some further reforms can be agreed. This is precisely what we have been striking to stop, and while the all-DC possibility has been little discussed in recent weeks it is sobering to note that the website for the statutory USS consultation continues to record that “the decision from the Joint Negotiating Committee on 23 January 2018 still stands”. Until that changes, nothing can be said securely to have changed.
None of this means that the UUK proposal should be rebuffed. We should be receptive to the undertakings made to adopt a properly impartial and expert approach to the scheme valuation, and to leave behind us not only the November but also the September deficit claims until a proper assessment of the scheme has been carried out. We should also welcome the principle that the status quo in benefits and contributions must be maintained until that assessment has been completed.
But we must not allow ourselves to be lulled into a false sense of security by promises which UUK lacks the power, even if it has the will, to make a reality. We need UUK to extract a clear and public commitment that tPR will accept an extension of the deadline for completion of the valuation, and a similar statement from the USS trustee that the conclusions of the new panel will be allowed to replace the current November valuation as the basis for any benefit reform, and that no changes will be imposed upon scheme members until then. If and when those commitments have been made, we can begin a conversation about calling off our industrial action. Until then, we must remain firm.
— Sam James (Cambridge UCU Vice President)