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UCU response to HEPI’s new paper on the Universities Superannuation Scheme (USS)

  • 8 February 2019

This guest blog responding to HEPI’s new report on university pensions has been kindly provided by Matt Waddup, the Head of Policy at the University and College Union.

If you don’t know where you’ve come from, you don’t know where you’re going is the message that underpins Nick Hillman’s rags to riches story of the Universities Superannuation Scheme (USS) pension fund. From humble beginnings it has grown to become the largest private pension fund in the UK with assets of more than £60bn.

What Hillman’s history lesson tells us is that the employers’ proposal to replace the guaranteed pension with a defined contribution (DC) scheme would have taken us back more than 100 years to the first pension scheme where risk rested wholly with university staff.

Hillman makes clear the centrality of UCU – and its predecessor – to the development of decent sector-wide benefits. In 1964 the government’s Maddex committee, which began the long and winding journey to the setting up of the USS 11 years later, included representatives of the union as well as universities.

As Hillman’s analysis makes clear, the ownership of the scheme is an important political issue, which is at the root of the current dispute. There is a palpable and justifiable sense among staff that USS is ‘our’ scheme: our forebears fought and argued for it, they helped build it, and we are damned if we will stand by and see it destroyed.

This brings me to Hillman’s conclusions. Here he is too kind both to universities and to USS. He tells us that the future of USS can only be secured if both sides are prepared to ‘give as well as take.’

I think this ignores the fact that the 2017 proposals were the latest and most extreme of a series of proposals which had substantially reduced core pension benefits, while increasing their cost. Plenty of take and not much give, one might argue.

On each occasion staff were told that these reforms would be enough but each time – sometimes within a matter of months – the talk returned again to reform. With each iteration staff have become less convinced that the actuarial and political arguments for change stack up.

Hillman is also wrong in my view to suggest that the union’s robust position on pensions may even have ‘exacerbated the shift … towards cheaper and more casualised labour.’

Casualisation began to intensify in higher education during the 1990s when employers’ USS contributions went down. More recently income in the pre-92 university sector has increased (by 38% since 2010), while the percentage of income spent on staff costs has fallen from 56% to 53%.

Whatever the pressures that currently exist on universities, the idea that they are in a zero-sum game where unaffordable pensions are a trade off against keeping a reserve army of hourly-paid staff is fanciful, and ignores the deep rooted reality of universities’ exploitative employment model.

What might be more fruitful to explore is why spending on staff has increased more slowly than in other areas. Not least since most surveys show that this is an area that students want prioritised.

Hillman also overlooks the role of USS in the genesis of the current dispute. USS reported in 2018 that scheme member satisfaction fell by nearly 20%, with those reporting a positive relationship with the Trustee falling still further to barely half the target score.

Those worrying figures can be confirmed anecdotally by a visit to any university and a discussion with staff from the most senior to those just starting out. One response to this is to circle the wagons and blame others for spreading misinformation. Another is to reflect on what needs to change and become more open to stakeholders’ concerns.

The most pressing task of all is for staff and employers to be confident again that their interests are paramount in how the scheme is taken forward. A key test therefore is how the main players respond to the work of the Joint Expert Panel (JEP).

Hillman is surely right to conclude that an independent review of the type offered by the JEP is crucial to regaining confidence. USS and others must engage seriously with the JEP’s findings, which have very widespread support across the higher education sector.

What does Hillman’s history lesson tell us about what should happen next? Trust must be fully restored if we are to move forward – there must be no more ‘back to the future’-style attempts to dismantle the guaranteed pension.

After a dispute which rocked the foundations of higher education, it is positive that both UCU and UUK have agreed to support the JEP’s initial proposals to resolve the dispute and, crucially, the longer term work now being undertaken to see if a consensus can be found around a new valuation method and governance.

An optimist might note from Hillman’s study that great things were achieved by unions and employers working together to set USS up and observe that, while the stakeholders may often disagree, both sides have a clear mutual interest in ensuring that USS works in our interests.

As for UCU, we were there at the beginning and our mission – to protect members’ hard-earned pension benefits – remains the same.

There is another important intergenerational challenge too, which is the position of relatively low paid, often early career, casualised staff, most of whom have inferior or non-existent pension rights compared to permanent colleagues. These staff are some of the most exploited in the sector and USS must be just as much their scheme as it for professors.

The USS dispute represented a howl of outrage from staff fed up with the way things were going and for whom the threatened pension cut really was the last straw.

The JEP report and the negotiations which emerge from it provide an opportunity to turn the page and move on to address the underlying issues within the USS. UCU’s commitment to the scheme we helped set up is undimmed and we urge others to work with us to secure its future.

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