Higher-education employers in the Universities Superannuation Scheme, London, are proposing moving participants into a defined contribution plan, according to a statement on the website of Universities U.K., a universities representative organization.
The £60 billion ($79.1 billion) pension fund's deficit is more than £5 billion, caused by "difficult economic conditions," which have also caused an increase in the future cost of defined benefit plan benefits of more than a third since 2014, according to the statement.
The proposal is "that future benefits would be delivered by the USS Investment Builder section providing a market-leading defined contributions scheme. This proposal would tackle the scheme's financial deficit and rising future costs whilst ensuring that it continues to offer attractive pensions benefits to members," the statement said. There was no further information whether this proposal closes or freezes the defined benefit plan, and what the timetable of the benefit changes would be.
"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 U.K., in the statement. "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," Mr. Jarvis said. "The option of no reform would be a dangerous gamble that employers are unwilling to take."
The statement says that employers would still continue to contribute 18% of salaries.
USS officials were not available by press time.