Universities UK (UUK), the representative organisation for UK universities, has proposed closing the Universities Superannuation Scheme (USS) to future accrual and moving members to a defined contribution (DC) arrangement in order to tackle the scheme’s deficit and the rising cost of future pensions.
The USS, which is one of the largest private pension schemes in the UK for academics in universities and other higher education and research institutions, estimates a deficit of approximately £7.5 billion, while the cost of funding the current benefits offered in the scheme has risen by approximately 11%.
Under the proposed changes, future pension benefits would be delivered by the USS Investment Builder section of the scheme, a DC arrangement.
The 350 higher education employers, which are part of the scheme, are keen to avoid any costs being passed on to members, as well as any changes that might impact funds being allocated away from areas such as teaching and research, but remain committed to maintaining their total 18% contribution to USS.
According to Universities UK, its proposal would work towards decreasing the scheme’s financial deficit and potentially any future costs while ensuring that it continues to offer members an attractive pension benefits package.
Members’ accrued pensions would not be affected by the changes to the USS benefit structure, with changes only relating to future benefits.
In response to the proposal, the University and College Union (UCU) is to ballot members on industrial action.
Alistair Jarvis, chief executive of Universities UK, said: “The costs of USS need to be controlled to ensure the scheme remains sustainable and secure for the long-term. 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.
“Most universities can’t afford to pay more into pensions without diverting money from other central areas, such as teaching or research, reducing their positive impact. Increasing contributions could damage the high standards that students, research funders and others rightly expect. It could even undermine the sustainability of some institutions.
“The option of no reform would be a dangerous gamble that employers are unwilling to take.”