Magazine article The Times Higher Education Supplement : THE

Union Clash Looms as Pension Plans Revealed

Magazine article The Times Higher Education Supplement : THE

Union Clash Looms as Pension Plans Revealed

Article excerpt

Employers propose scrapping final salary scheme to reduce USS deficit. Jack Grove reports

Universities are set on a collision course with unions after confirming that they want to scrap final salary pensions offered by the sector's biggest scheme to reduce an estimated £13 billion deficit.

Under the plans, about 130,000 higher education staff who currently pay into the Universities Superannuation Scheme's final salary scheme would be moved to the career revalued benefits (CRB) scheme (or career average benefits scheme) that was introduced for new entrants in 2011.

Writing in this week's Times Higher Education, Anton Muscatelli, vice-chancellor and principal of the University of Glasgow and chair of the Employers Pensions Forum, which represents Universities UK, GuildHE and the Universities and Colleges Employers Association, says that "more change is necessary to ensure that the sector is able to address the deficit".

Professor Muscatelli says employers want "an extension of the [CRB] section to all active members and the closure of the final salary section".

However, the change could result in an effective pay cut of 10 per cent as CRB pensions are far less generous in terms of employer contributions, one sector expert has warned.

Pensions consultant John Ralfe, a former head of corporate finance at Boots, said the annual cost to institutions of providing a final salary pension was 19.9 per cent of pay compared with 11.3 per cent for CRB, based on USS figures released in 2011. Changes in interest rates since then had increased the 8.6 percentage point difference to close to 10 points, he said.

The proposed reforms could lead to a repeat of the strike action in 2011 over similar plans to end final salary pensions for all. The University and College Union is ready to ballot branches about possible walkouts.

Radical change needed

The announcement from the Employers Pensions Forum - which follows draft options drawn up by the fund's trustees - comes midway through a consultation with employers about the affordability of pensions provided by the USS, which Professor Muscatelli writes is suffering a "very substantial deficit".

Radical changes are required, he says, to reduce the risk in the scheme in order "to avoid future unaffordable contribution increases for both employers and members".

The Employers Pensions Forum was considering CRB benefits "to be provided up to a specified salary threshold, with an additional defined contribution element being provided in respect of salary above this threshold", he adds. …

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