Participants of the £60 billion ($82.8 billion) Universities Superannuation Scheme, London, rejected a new proposal that would require higher contributions from employers and employees in an effort to maintain defined benefit arrangements before potentially moving to a collective defined contribution plan.
Universities U.K., representing the views of more than 350 higher education employers, said Monday it had reached an agreement with the University and College Union, representing participants, after six days of talks. UCU, however, said Tuesday it had now rejected the proposal. "UCU representatives from the universities where staff are on strike over plans to cut their pensions met at the union's headquarters today. The union is calling for urgent negotiations with the universities' representatives ... aimed at resolving the dispute. The union said the strikes and action short of a strike remain on, and it would now make detailed preparations for strikes over the (university) assessment and exam period," said a notice on UCU's website. University staff have carried out protests and strikes at changes to the fund.
The revised proposal includes a transitional benefit arrangement, "which maintains a meaningful level of defined benefits for all scheme members," according to the document on the proposal. This arrangement will last three years starting April 1, 2019. In order for this interim solution to be achieved, employers and participants will need to pay higher contributions.
Total employer contributions will be 19.3%, while total employee contributions will be 8.7%. These increased contributions will only be in place for the transition period. The current contribution rate totals 26%, split 18% employer and the remaining 8% contribution by the participant. However, prudent funding assumptions set by the trustee board in November showed that maintaining the current level of benefits would require a combined employer and employee contribution rate of 37.4% of pay.
Under the proposal, UCU and UUK agreed to work together to find alternative options for the future of the pension fund, following the transitional period which runs to March 31, 2022. "The consideration of any alternative would include the potential impact on recruitment and retention, with a view to reviewing the different provision within the sector. The focus of this work will be to develop alternative ways of risk sharing, in line with (collective DC), seeking to maintain and develop members' confidence in the scheme. This will also include work with government so that suitable statutory underpinning is available to adopt this," said the document."
The two representative bodies also would have formed an independent expert valuation group for the triennial pension fund valuation under the new proposal, given concerns raised by some employers and the union over methodology and assumptions. The group will include academics and retirement professionals. "The objective will be to inform the next USS valuation and therefore will be completed by the end of 2019. The group will consider issues of methodology, assumptions and monitoring, aiming to promote greater transparency and understanding, and will take account of the real strengths, sustainability and viability of the scheme," said the agreement.
The proposal also would have committed both parties to "engage in meaningful discussions as soon as possible to explore risk-sharing alternatives for the future from 2020, in particular collective defined contributions."
The new proposal means a participant consultation on the future of the fund, scheduled to begin March 19, has been suspended until a decision on the revised proposal is made. The proposal is subject to consultation by both parties and subsequent agreement by the USS Joint Negotiating Committee, which brings together an equal number of representatives from UUK and the UCU. The JNC meets March 14, said UUK's notice.
USS has a £6.1 billion deficit. A plan to reduce its deficit must be submitted to the U.K. Pensions Regulator by June 30.