The signs of a weakening in the UUK position had been apparent for some days as one university after another rejected the basis for the closure of USS for future DB accrual.
The final nail in the coffin was delivered shortly before the announcement last night that I’ve posted below.
After a dignified period in which Cambridge didn’t follow Oxford in reaffirming the current pension scheme, our VC has finally seen the light. Can @UniversitiesUK now apologise and let us get back to work? Or just the latter, if the apology is hard? pic.twitter.com/zPb7DtV6tE
— Nicholas Guyatt (@NicholasGuyatt) March 12, 2018
The deal is not permanent, contains substantial reductions in benefit accrual and even reduces the DC match for higher earners. It sticks to the cash flows established in the revised November deal but critically it retains the principal of DB accrual.
There are hardliners in the UCU who are calling for “no capitulation”- which is why my headline downgrades “should” to “could”.
But for the few remaining days of this term, let’s hope students will get some teaching, lecturers some comfort and the Universities some time to consider why they could not have made these concessions earlier.
This has been a disgraceful episode, the impact of which will be felt for years to come. After the relief of the announcement will follow the anger that this battle ever had to take place.
The way is now open to a proper negotiation of the long term future between UCU and UUK. I am pleased to see that no options have been ruled out and hope that the independent valuation group will ensure that never again is the conduct of a valuation carried out in the way this one has.
Agreement reached between UCU and UUK under the auspices of ACAS
On Monday 12 March, ACAS talks on USS concluded with Universities UK (UUK) and the University and College Union (UCU) agreeing to a revised benefit reform proposal (subject to consultation by both parties and subsequent agreement at the USS Joint Negotiating Committee (JNC)).
Headline agreement
Both parties agreed to a transitional benefit arrangement outcome for this valuation which maintains a meaningful level of defined benefits (DB) for all scheme members. The transitional arrangement will take effect from 1 April 2019 lasting for 3 years.
To achieve this interim solution both employers and members will be required to pay higher contributions. This includes a total employer contribution of 19.3% of salaries and a total member contribution of 8.7%. These increased contributions are only in place for the duration of the 3-year transitional arrangement.
Given the concerns raised by some employers and UCU about the scheme’s valuation methodology and assumptions an agreement has been reached between UCU and UUK to convene an independent expert valuation group.
By recognising the agreement on benefits is set as a transitional 3-year solution there is commitment between both sides to engage in meaningful discussions as soon as possible to explore risk sharing alternatives for the future from 2020, in particular Collective Defined Contributions (CDC).
Transitional benefit arrangement
| Both sides agree to maintain a meaningful element of defined benefit (DB) at this valuation which includes: Feature | ACAS talks outcome – to take effect from 1 April 20191 |
| Salary threshold | £42,000 |
| Accrual rate | 1/85th |
| DC contributions above the salary threshold | Remain as 12% above the salary threshold |
| Indexation and revaluation2 | Capped at CPI up to 2.5% p.a. |
| Death in Service and Ill-health benefits | Retained as DB on full salary adjusted in line with revised accrual rate |
| 1% match | Removed |
| Investment Management Subsidy | Retained at a cost of 0.1% (as part of the employer contribution) |
2.5% hard inflation cap on both uprating accruals and pensions in payment! This will erode the value little by little even with benign inflation fluctuating around the target. A burst of serious inflation will destroy the value completely. It’s also a sell-out of existing pensioners – my understanding is that this will apply to pensions already in payment.
A terrible deal, irrespective of a change in the contribution rate, which works out at about a 22% increase in the cost of future accruals (we need to know the proposed amount of deficit contribution to get the exact figure).
So much for gold-plated promises, when will the industry face the systemic issues which bring down these structures? It’s nothing to do with individual dishonest individuals but a flaw in the structure
I would not be too sure that this agreement will satisfy the members. It is not just a few hardliners who are rejecting it. An emergency all-members meeting this morning at Warwick has just voted to reject by 115 to 0 with 5 abstentions.
One of the aspects of the dispute is that it has led to considerable growth in union membership, and many of the new members are among the strongest supporters of retaining the current DB scheme.