SPECIAL NEWSLETTER
Newsletter of the University and College Union,
Swansea University (www.swan.ac.uk/ucu)
July 2010
PENSIONS CRISIS
Members will be broadly aware of recent events concerning the employers’ proposed
reforms of the USS pension scheme. On 7 July, in a crunch meeting to decide on the
proposals, Sir Andrew Cubie, the ‘independent’ chair of the review group, sided with
the employers giving them a majority of 4 to 3. Sir Andrew had previously seemed to
indicate that he was unhappy with the employers’ proposals, with the constant
amendments the employers were introducing and with their failure to keep
confidentiality. He could have decided to vote in favour of the UCU proposals or not to
use his casting vote at all, but he used it to back the employers’ side. This cannot fail
to raise questions, especially as the proposals he approved included a number of
significant modifications inserted at the last minute by the employers. It is also worth
noting that, as revealed in an article in Times Higher Education entitled
‘Pension-reform lobby group was backed by public money’, HEFCE, the
government-funded Funding Council for England, gave £627,000 to the
employers’ body to scope and promote its proposals. This included £60,000 spent
on an expert actuary, £45,000 on legal advice, £30,000+ on PR (including a website),
and £10,000 on room hire and catering. Despite this, the balance of expert opinion
favoured the position put forward by UCU, supported as it was by two actuaries
employed independently by the union and the USS against the single one paid for out
of public money by the employer.
The proposals themselves, if implemented, are potentially devastating to the interests
of UCU members and to all staff in the USS pension scheme. There are 15 pages of
details, but the key aspects are as follows:
 The employee contribution will rise from 6.35% to 7.5% (i.e. an increase of 18%),
which will effectively mean a cut in salary for all scheme members
 The ‘normal’ pension age will be 65, which means that members will not be able
to choose, as now, to retire at 60 and to immediately take an unreduced pension
(with exemption for members currently over 55). Any future rise in the state
pension age will also trigger a corresponding rise in the USS pension age.
 Pension increases, whether for pensions in payment or in deferment, will be
based on the Consumer Prices Index (CPI) rather than, as now, on the Retail
Prices Index (RPI), and there will be a 5% cap. The CPI characteristically runs
2-3% lower than the RPI. This is one of the ‘last minute’ modifications
introduced by the employers and will mean that both current and future
pensioners are likely, after 20 years of retirement, to be drawing a 15%-20%
lower pension
 A Career Average Revalued Earnings (CARE) system rather than a final salary
scheme will be implemented for new entrants. This will mean a massively
reduced end-of-career pension. Existing members may consider that they are
not directly affected by this, but it marks the beginning of an invidious two-tier
pension system, which, with the CARE principle established, could well be
extended in the future to include existing members.
These proposals now go to the trustee board of USS, which seems certain to accept
them. It then has to organise a statutory consultation in the sector via the employers.
In practice this means that the consultation will be with the recognised trade union,
UCU. UCU has said that a ballot of all members of the Universities
Superannuation Scheme (USS) is necessary if the consultation process is to
engage with members in a fair and transparent way and have any legitimacy,
especially in view of the revelations about taxpayers’ money being used to promote
the employers’ case. Given the significance of the subject matter, a token consultation
exercise would be unacceptable. UCU General Secretary, Sally Hunt has said: ‘We
would hope the employers share our desire to ensure change of this magnitude is
properly mandated, not simply pushed through.’
UCU is asking for full support from its members in opposing the proposed drastic
slashing of pensions benefits and preventing such changes being forced through
without USS members’ agreement. We hope that by ensuring the consultation process
is meaningful and not a sham and by taking account of the responses, then it will not
prove necessary to move to a ballot for industrial action. But a trade dispute is
something for which members should be prepared.
Sir Andrew Cubie gave as his justification for taking the employer’s side that he was
supporting ‘changes that are in the best, long-term interests of the scheme as a whole’.
Yet, despite the employers’ claims and the large amount of public money spent
by them in attempts to back up these claims, the USS pension scheme is not
running out of money. At its last valuation in March 2008, the scheme was in
surplus with assets of £30bn and has a healthy positive cash flow. The ‘deficit’ of
£17bn the employers have been fond of quoting arises from the spurious accountancy
rules which pension schemes are obliged to use and which always make the figures,
no matter how solvent a pension scheme is, seem alarming. These rules oblige
schemes to state their financial position based on gaps between current assets and
hypothetical long-term liabilities (the so-called ‘historic funding basis’). The picture this
gives is highly distorted and is absolutely no basis for the steps sanctioned by the
chair of the Review Board. It means in effect an inferior pension scheme for pre-1992
University compared with colleagues in post-1992 institutions who are members of the
Teachers’ Pension Scheme which offers benefits similar to those of the current USS. It
cannot, and will not, go unchallenged.