Letter to staff in USPAS eligible grades
17 September 2008
Dear colleague
Future Pension Provision
I am writing to you following the University’s receipt from Unite the Union of a notice that it
will be balloting its members regarding Industrial Action. Unite is asking its 89 members
at the University whether they wish to take part in strike action and/or action short of a
strike. The ballot notification and sample ballot paper sent by Unite to the University do
not specify the nature of the dispute but the University believes that the potential action
relates to the University's proposals to make changes to future service pension provision
for staff in USPAS eligible grades.
I appreciate that you yourself may not be a member of Unite at Sussex but, as the
University does not know who the 89 members at Sussex are (and the union is not
required to provide this information), I felt it important to write to you so that you fully
understood the present position and that those of you being balloted on industrial action
are aware of how the University will respond to any industrial action so that you can make
an informed decision when voting on the industrial action ballot.
1.
If you are a current USPAS member:
Although I wrote to you on 18 August, I thought it would be helpful to remind you of the
University's proposal for changes to USPAS and to set out how the proposal has been
revised following consultation. Your own position as a current USPAS member has been
very well protected by the University’s proposal to keep USPAS open to you as a Defined
Benefit pension scheme. Keeping the scheme open for current members has been a key
aim for the University. In order to help do this, the University has proposed some changes
to USPAS which have been the subject of consultation with you. As a result of listening to
current members during the consultation process, and to the trades unions, the University
has revised the changes it had originally proposed for USPAS. In particular, the University
has:
o
Lowered the amount of the proposed increase in employee contributions
from 10% starting in January 2009 to 9% to be phased in over 3-years
starting at 7% in August 2009. See table in attachment for summary.
Jane Summerville
Director of
Human Resources
Human Resources
Sussex House
University of Sussex, Brighton
BN1 9RH United Kingdom
T +44(0) 1273 877083
F +44(0) 1273 877401
J.Summerville@sussex.ac.uk
www.sussex.ac.uk
o
Protected members from the inevitable increase in contribution rates that will
arise from the 2009 valuation of USPAS by committing the University to take
the full cost of such increase (as yet unknown) onto the employer contribution
rate for the period until the 2012 valuation. In August 2009, the University’s
contribution rate will be 13.5% for future service plus 11.1% for funding the
past service deficit, i.e. a total employer contribution of 24.6% for an
employee contribution of 7%. The employee contributions in August 2010
and 2011 will be 8% and 9% respectively but the employer contributions are
unknown because of the University bearing the cost of the 2009 valuation;
however, they are unlikely to be less than 24.6% and in any event will
increase by 1.4% in 2012 because of legislative changes.
o
Raised the proposed inflation cap on pensions in payment from 2.5% to 3%.
o
Introduced an exception to the proposed actuarial reduction on early
retirements, where the early retirements are “in the management interest”.
o
Changed the proposed future cost-sharing split from 50:50 to a split in the
region of 65% employer and 35% employee funding on the increases in cost
of future service provision following future valuations, such valuations to take
effect from the date of the 2012 valuation and not that in 2009.
o
Excluded from the cost-sharing with employees an increase in contribution
rate due to the ageing effect of members in the scheme once it is closed to
new entrants: the University will bear the cost of this “ageing” effect itself.
A fuller description of the revised proposal is set out as an attachment to this letter.
2.
If you are someone who has recently joined the University and are within
your 6-month window of eligibility for joining USPAS:
You will remain eligible to join USPAS within your 6-month eligibility period.
3.
If you are someone who did not join USPAS within your 6-month window of
eligibility for joining USPAS:
If you are one of the 40 – 45% of staff who did not join USPAS within your period
of eligibility and consequently do not have pension provision from the University,
you will be re-offered the opportunity to join a pension scheme which will be the
new Defined Contribution Scheme which will also be offered to future members of
staff. Further information on this scheme is in the attachment to this letter.
4.
For all staff who are pension members (USPAS or the new scheme):
In response to a request from some USPAS members and the unions, the
University plans to introduce a salary sacrifice scheme, all things being equal,
when the payroll system is replaced. Salary sacrifice is an arrangement whereby
the employee chooses to give up part of his/her salary in lieu of the employee
pension contributions. As a result, both the employee and employer save the
National Insurance contributions that would otherwise have been payable on this
part of their salary.
2
5.
Information for if you are a Unite member
The University's proposals to change future service pension provision have been the
subject of detailed consultation and negotiation with the trades unions that represent staff
in USPAS eligible grades, including Unite. In addition, the University has engaged directly
in consultation with current USPAS members about proposed changes to USPAS itself.
As a result of listening to current members and to the unions, the University has made
changes to its original proposal.
By protecting USPAS as a scheme for current pension members and by offering an
attractive scheme to current staff without pension provision and to future employees, the
University believes that it is acting responsibly as an employer. In this respect, the
University hopes that current employees who are union members, whether in USPAS or
not, will not vote for industrial action as this will not change the position we are currently
in. The appropriate forum and method for the unions and for individual staff to influence
the University's proposal has been the extensive consultation and negotiation process
which is close to completion. However, I feel it necessary to bring to your attention, if you
are a member of Unite, the action that the University will take in relation to the pay of
those staff who participate in any industrial action that may be called by the union if the
ballot is in favour of such action:
a. Strike action: strike action forms a breach of contract in that the person on strike is
not fulfilling their contractual obligations. As a result, an employee taking part in
strike action will lose his/her entitlement to pay for the duration of the period for
which s/he is on strike.
b. Action short of a strike: where an employee takes part in action short of a strike,
this represents partial performance of his/her contractual obligations which is also like strike action - a breach of contract. In these circumstances, the employee
concerned will also lose his/her entitlement to pay. The University is entitled to
withhold 100% of pay for this period. Any payment that is made to staff taking part
in such action would be entirely discretionary by the University and made on a
voluntary and ex gratia basis.
c. Declaration: in order to ensure that only staff who participate in any strike action or
action short of a strike are those whose pay is withheld, the University will ask all
staff in the relevant groups to declare that they are not participating in any action
that may be called so that the necessary deduction can be made from those who
do not so declare.
As stated at the start of this letter, the University does not know whether individual
members of staff are in Unite the union or not and the union is not required to provide this
information. Therefore my letter is written to all staff in the relevant grades to ensure that
everyone has the opportunity to understand the current position.
Yours sincerely
Jane Summerville
Director of Human Resources
Att.
3
ATTACHMENT TO LETTER OF 17 SEPTEMBER 2008
If you are a current USPAS member: the revised proposal for changes to USPAS
a. Contributions:
Original proposal:
To increase Employee contributions from 6% to 10% with effect from 1
January 20091.
Revised proposal:
To phase-in an increase in Employee contributions from 6% to 9%
over a three year period, with effect from 1 August 2009; the
University to absorb any additional cost arising from the 2009
valuation for the period up to the 2012 valuation.
August 2009
August 2010
August 2011
7% employee
8% employee
9% employee
b. Cap on RPI on pension in payment in retirement, relating to service accrued with
effect from 1 January 2009:
Original proposal:
To reduce inflation cap from 6% to 2.5%.
Revised proposal:
To reduce inflation cap from 6% to 3%.
c. Actuarial Reduction, relating to service accrued with effect from 1 January 2009:
Original proposal:
An actuarial reduction would apply to the pension of staff who retire
before age 65.
Revised proposal:
To introduce an exception to an actuarial reduction for early
retirement where early retirement is “In the Management Interest” –
i.e. at the request of management.
d. Cost-sharing on future service increases:
1
Original proposal:
Future increases in the cost of future service USPAS benefits, as
determined at future valuations, would be shared 50:50 between
employer and employee.
Revised proposal:
To change the split from 50:50 to a split in the region of 65%
employer and 35% employee funding on the increases in cost of
future service provision following future valuations, such
valuations to take effect from the date of the 2012 valuation and not
that in 2009.
Original date was 1 August 2008 but deferred with Council’s agreement to 1 January 2009.
4
If you are someone who did not join USPAS within your 6-month window of
eligibility for joining USPAS; (also for future employees):
Original proposal:
To offer a flexible and portable Defined Contribution (DC) scheme with a
contribution structure between employer and employee as follows:
ER %2
5
6
7
8
9
10 max
EE%3
3
4
5
6
7
84
To provide death-in-service benefit of 3.5 times salary, paid as a lump
sum.
To promote the scheme actively to encourage a much higher
participation rate than currently (rather than wait till 2012 when the
government brings in auto-enrolment) at the 3% employee / 5%
employer level. (The employee would be eligible to opt out if s/he
chose).
Revised proposal:
To revise the contribution structure to give a 2:1 match between
employer and employee contributions, as follows:
ER %5
6
8
10 max
EE%6
3
4
57
To make a bonus payment of 2.5% of annual salary every 5 years
that an employee is in the scheme, to boost savings in the scheme.
To pay for an employee who is retiring from employment with the
University to have a session with an independent financial adviser
to assist them when making decisions on purchasing an annuity.
To consider offering (i) a dependant’s death-in-service pension and
(ii) Permanent Health Insurance in the case of long term sickness
(University seeking a costing before making firm proposal).
2
Additionally, the Employer will be paying additional NI contributions (currently around 1.1%) and 0.75% for insuring
the proposed death in service benefit. The combination of these additional sums takes the maximum Employer
contribution in 2012 to 11.85% for an Employee contribution of 5%.
3 The DC scheme would not be contracted out of the State 2 nd Pension Scheme (S2P); the employee would therefore pay
additional National Insurance (NI) contributions on top of their employee contribution and would be entitled to receive
the State Second Pension, not available to staff in USPAS.
4 Or more if the employee chooses.
5 As in 2
6 As in 3
7
As in 4
5