911±¬ÁÏÍø

USS is currently consulting its members over proposed changes to your pension scheme. These are potentiallyÌývery serious detrimental changesÌýfor every member. The deadline for the employee consultation isÌý2 November.Ìý

In this email we review three scenarios that are now in front of us. AtÌýthe end, we indicate how colleagues might wish to respond to the USS consultation.

1. Cost-sharing, worst-case scenario under Rule 76.4-8

USS is currently formally consulting over a proposed change to contributions from employers and employees under Rule 76.4-8. This imposes a huge hike in costs to every active member of USS.

The grounds for this is a 'worst case' conservative interpretation of theÌýNovember 2017Ìývaluation. This presumes that USS is in a protracted crisis and is obliged to begin moving its assets to the 'safe haven' of government bonds and gilts (generically, 'gilts'), and keep them there in perpetuity.Ìý

Since gilts are predicted long-term to have a low, below-inflation return, the consequence of this process (termed, misleadingly, 'de-risking') is to create a large risk of default, and a deficit that must then be covered by increased contributions.

The effect of this 'cost-sharing' proposal, which will take place unless and until a decision is made by the USS Trustee Board to change it, is the following.

• Employees' contributions will rise from 8% to 11.7% of salary,Ìýan increase in your payment to USS of 46.25%. As these figures are large, it has been proposed that they be introduced in stages:
  • 8.8% from 1 April 2019, then
  • 10.4% from 1 October 2019, thenÌý
  • 11.7% from 1 April 2020.Ìý
• Employers' contributions will rise from 18% to 24.9% of salary, an increase in the Employers' contribution of 38.33%.Ìý
• The 'DC match' scheme (where employees can opt to put in 1% of salary and have it matched by the employer in a Defined Contribution portfolio) is abolished.Ìý

2. The Joint Expert Panel proposal

Over the summer, the Joint Expert Panel, made up of actuarial nominees from UCU and UUK, reviewed the health of the scheme and,Ìýinter alia, determined that USS trustees could safely accept the results of theÌýSeptemberÌý2017Ìývaluation.Ìý

If the USS trustee accepts the JEP proposal, then total contributions would rise to 29.2% of salary (i.e. a 12.3% increase in contributions).Ìý

There is no obligation to split the costs between the employees and the employers in the same ratio as under 'cost-sharing'.Ìý

At our most recent 911±¬ÁÏÍø UCU General Meeting, members resolved that the employers should agree to pick up the cost. However, UCL's management want you to pay 1.12%Ìý(a 14% increase inÌýyourÌýpaymentsÌýto USS).

3. Recent analysis by Sam Marsh, University of Sheffield UCU Pensions Officer and newly-elected USS national negotiator

A third possible position is established as a result of an investigation conducted at the University of Sheffield. Dr Sam Marsh obtained data from USS which shows thatÌý.Ìý

USS devised a test, 'Test 1', which is supposed to trigger de-risking if certain conditions are met.ÌýDr Marsh established that the wrong input data was fed into the formula.ÌýTest 1 should not trigger and therefore no de-risking should be modelled.Ìý

With no de-risking, there is no deficit. No changes to contribution rates are then necessary.Ìý

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How should colleagues respond to the USS consultation?

We would strongly encourage colleagues to respond to this consultation!Ìý

• You will need to visit the consultation websiteÌý
• You will need your USS membership number (see e.g. your 2018 annual member statement), and your National Insurance Number. If you can't find your USS membership number, you can contact 911±¬ÁÏÍø Pensions and they should be able to give it to you.Ìý
• A range of experts have collaborated on aÌý, published by USS Briefs. In essence it argues in favour of position (3).