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As scheme members may already know, on Tuesday 22 February 2022 the Joint Negotiating Committee (JNC) met to discuss proposals to reform the Universities Superannuation Scheme (USS). In all universities, there has been considerable concern among scheme members about the need to maintain a workable and affordable USS into the future, which would above all avoid the ‘fall-back’ position coming into effect on 1 April: this would have significantly increased contributions for all USS members.
As a result of the agreement of 22 February, from 1 April 2022, employers will pay 21.6% and USS members will pay 9.8% into the scheme. The JNC decision must now be considered by the USS Trustee in accordance with formal processes under the scheme rules, but it is expected that the changes will be implemented from 1 April 2022.
The JNC is made up of equal numbers of Union and employer representatives, and has an independent Chair. It formally agreed on behalf of scheme employers to proceed with the proposal as put forward by Universities UK (UUK).
We are all aware that this decision to conclude the 2020 valuation is unlikely to bring an end to industrial action in relation to the pensions issue. Opinions on the decision taken will legitimately differ, and we do not in any way underestimate the concerns and anxieties connected with this process. But our own decision to support the UUK proposals was taken with the interests of current and future members of the scheme, present and future students and the University as a whole, squarely in mind. We will continue to do all in our power to safeguard those interests. We ask everyone in the Durham community to base their actions on mutual respect, and in the understanding that this is a complex national issue for the university sector as a whole.
Where are we now?
On 18th February Durham and other universities responded to the UUK consultation about the UCU proposals (put forward on 10th February). Almost all the employers concerned stated that they were not able make the UCU proposals work. The proposals themselves were submitted too late for a view from the Pension Regulator to have been obtained by the USS Trustee.
Durham University stated that:
“We acknowledge that the UCU has recently brought new ideas to the table. We have given the UCU proposals careful consideration. Regrettably, we do not think that the UCU proposals as they currently stand are workable. Time is not on our side. The UUK proposal is the only workable option that will avoid the total contribution rate escalator taking effect from April – an outcome that would put an unacceptable financial burden on staff and, through its impact on Universities, on students. We do not therefore recommend a change from our Council-approved position which is to support the UUK proposal. However, we do believe that, as a matter of urgency, there is a need to accelerate discussions with stakeholders on reform of the USS scheme.”
What have we been doing as a University to work towards a solution that delivers a good pension at an affordable price for our staff?
“Durham University would be open to considering extending our existing covenant support to an alternative proposal as long as such a proposal, whether originating from UUK or UCU, is affordable to the employees and employers.
We also support further work to be undertaken as a priority to reform scheme governance, and to explore lower cost options for members and scheme design for the future. We believe it is important to reiterate that we do not see this as a cost saving exercise. As stated in our responses to earlier consultations, we believe flexibility should be about choice for members, and should be considered separately to the funding discussions. In particular, we would support the exploration of an option where the choices members make are not linked to saving costs for employers or USS. We would support an option where employer contributions to remain the same for every active member in USS, whatever a member’s choice of contribution level.”
How have we engaged with Trade Unions on this Issue?
Since April 2020 we have met with all of our campus trade unions fortnightly or weekly. The University has also held separate meetings with UCU about USS.
We have invited the UCU President and the UCU Pensions Officer to attend a meeting of the Pensions Sub-Group (this group was established by Council to ensure it was fully involved and endorsed key employer-related decisions relating to USS and outcomes for both University and its staff). This Group has also been provided with full details of the UCU alternative proposal and any other materials provided by our local UCU representatives.
The University first suggested the possibility of a joint statement on USS in August 2021 as we believed there were a number of issues where we were in agreement with UCU, including a desire to expedite an investigation of conditional indexation as a potential long-term solution to the problems with the USS. Unfortunately it was not possible to reach agreement with our local UCU branch on this issue.
We will continue to work with our trade unions as the situation develops.
What could we do next?
The Joint Negotiating Committee contains equal numbers of Union and employers’ representatives and has an independent chair. Should no outcome be agreed, the USS Trustee requires that employers implement a “cost escalator” of employer and member costs, which would see employer contributions rise in steep steps to 18.8% of salary for members and 38.2% for employers by April 2025. This would have grave financial consequences for universities, for jobs, the job prospects of PhD students, and for individual employees who may not be able to afford to enter or remain within the scheme. Should any employer become insolvent as a result, their share of the estimated deficit would have to be absorbed by all the remaining members.
The USS Trustee is legally required to carry out a valuation every three years, although they can choose to do so sooner. The most recent valuation was in 2020. While an improved market position since the March 2020 valuation may mean that the deficit position may have improved, future service costs would be likely to rise and the outcome would not be materially different when it comes to contribution rates. The most recent published view of the Chair of the USS Trustee cautions against optimism about future valuations.
As we indicated on 18th February, should an agreement be reached on 28th February 2022, we would proactively support a re-engagement between UCU, UUK and the USS Trustee around the longer-term future of the scheme. For example, in August, 2021, the University Councils and UCU branches of the Universities of Oxford and Cambridge jointly called for a new approach to USS scheme design.
We would welcome an opportunity to work together with the Durham UCU to explore future improvements to the Scheme, as part of a broader dialogue with other member universities, once a decision has been reached on 28th February.
Professor Karen O’Brien, Vice-Chancellor and Warden
Last Friday UUK asked for responses to the latest UCU proposals. The overwhelming majority of employers who are members of the USS have not felt able to support the UCU proposals.
This is our response:
We acknowledge that the UCU has recently brought new ideas to the table. We have given the UCU proposals careful consideration. Regrettably, we do not think that the UCU proposals as they currently stand are workable. Time is not on our side. The UUK proposal is the only workable option that will avoid the total contribution rate escalator taking effect from April – an outcome that would put an unacceptable financial burden on staff and, through its impact on Universities, on students. We do not therefore recommend a change from our Council-approved position which is to support the UUK proposal. However, we do believe that, as a matter of urgency, there is a need to accelerate discussions with stakeholders on reform of the USS scheme.
The University and College Union (UCU) that represents a number of academic and professional services staff at the University have balloted their members on two main issues. These are:
This is a national dispute affecting many universities across the UK. This is not a dispute that can be resolved locally or by any one institution. The Union has a mandate for strike action in relation to pensions in 44 of the 344 institutions which participate in the USS scheme. Durham University cannot act in isolation to influence the outcomes that UCU is seeking or to resolve the issues which UCU has elected to take action about. This is because pay and pensions are negotiated nationally by Universities UK (UUK) and University and Colleges Employers Association (UCEA), and we are bound by sector-wide decisions. We do, however, have regular meetings with UUK and have used these to press on issues of concern to our staff.
Whilst we appreciate that the decision to take part in industrial action has not been taken lightly by our staff, we are concerned about any impact upon our students’ education. It is our priority to mitigate the impact of industrial action on our students.
Background to the USS dispute
The dispute surrounding the Universities Superannuation Scheme originated from the 2017 valuation of the Scheme’s deficit that was estimated to be £7.5 billion as 31 March 2017. This is the difference between the estimated amount USS needs to hold for the pensions already promised to members and the funds available to the scheme to make those payments (the total value of the Scheme’s assets). Subsequent valuations and estimates between then and 31 March 2021 have estimated the deficit to range from £3.6 billion to £17.9 billion. The latest estimate, as at 31 March 2021 is a deficit of £5.6billion.
In order to address the scheme deficit, in 2021 UUK put forward a set of proposals for consultation whereby employers and members bridge the deficit gap. An employee consultation, which closed on Monday 17 January 2022, allowed scheme members and eligible employees to share any comments or concerns about the proposed changes to the scheme. For the first time, as of Thursday 10th February, Universities UK have received costed proposals based on significantly increasing contribution levels for employers and employees. UUK now is consulting universities and their governing boards.
UCU members took 3 days of strike action in December in relation to both the pay and USS dispute and have now called for a further 10 days of strike action (5 days in relation to USS only, 2 days in relation to both pay and USS, and a further 3 days in relation to pay only). They are also asking members to take a range of actions short of a strike (ASOS). The UCU have notified that ASOS may include “removing uploaded materials related to, and/or not sharing materials related to, lectures or classes that will be, or have been, cancelled as a result of strike action”.
At this point, we will withdraw some pay in relation to only one element of action short of a strike (ASOS): the removal of teaching materials or refusal to share learning materials, should those materials not be made available by 7 March. We have asked staff to prioritise the education of our students on their return to work by ensuring they follow our agreed Mitigation Policy which includes the sharing of learning materials. It is only if they do not do so that we will reluctantly begin pay deductions at a rate of 25%. We are not making pay deductions for any other forms of ASOS at this time.
Commitment to pay and pensions
Durham University offers a competitive reward and benefits package, to attract and retain the very best people. We regularly review and improve our employment benefits and practices to ensure we remain a responsible and attractive employer for our staff. The national pay award is just one component of our reward package. Our total reward offer includes incremental pay progression, opportunities for accelerated pay progression for exceptional contribution, other recognition awards for all staff, generous annual leave entitlements and a wide range of other benefits and offers.
Durham University, along with the other employers who participate in USS, has increased the amount of money it contributes towards staff pensions by 50% over the last 12 years, from 14% to 21.4% of salary from October 2021, including a recent increase of 3.4%. We recognise that staff have also increased the amount that they pay towards their pensions which has increased in the same period from 6.35% to 9.8% of salary. We have supported measures and actions which maximise the benefits of what continues to be a generous pension offering, without additional and unsustainable costs to either members of staff or to the University. The position taken by Durham University has been agreed by its governing body, the University Council.