Members of the Universities Superannuation Scheme, one of UK’s biggest private defined benefit pension funds, could be £240,000 worse off at retirement due to changes made to the scheme.
The analysis, conducted by First Actuarial, showed that a typical member will pay around £40,000 more into their pension since the 2011 changes but receive almost £200,000 less in retirement than a hypothetical member who joined in 2011 on the same conditions but hasn’t been affected by the changes.
The USS scheme has seen contribution levels increase from 6.35 per cent of salary in 2011 to a proposed 9.6 per cent starting in October.
From next week (September 9) the University and College Union will ballot over 52,000 USS members in 69 UK universities for strike action due to the increase to their pension contributions.
The USS, which has around 419,000 members across 350 universities in the UK, has seen its deficit balloon to £6.6bn by the end of July, from £3.6bn at the last valuation in March 2018.
USS has a defined benefit as well as a defined contribution section but was due to become a fully DC fund under plans published in November 2017 by Universities UK.
By January 2018 UCU had announced 14 days of strikes across 61 universities. Then in April 2018 members of the scheme voted to accept proposals which included a guarantee that the DB element of the scheme would be maintained, while a joint-expert panel considered the valuation of the pension fund.
The union stated that, while the latest analysis showed those that earn more will lose more, the impact of increased costs on those on lower wages must not be discounted.
Jo Grady, UCU’s general secretary, said: “The latest round of increased contributions backed by universities represents another pay cut for staff. We are concerned that those on lower pay may well decide they simply cannot afford to pay for a pension any more, putting the future of the scheme at risk.
“Universities have to recognise the anger and frustration that members feel about the recent changes, how the scheme has been valued and how it has been run. It is not good enough to come back time and again with proposals that force members to pay more for reduced benefits.”
In response to the analysis, Universities UK stated that employers are now paying more than £400m extra per year into USS compared with 2011, with an increase in contributions tabled from 16 to 21.1 per cent of salary from October 2019.
A spokesperson at UUK said: “Since 2011, the cost of providing defined benefit pensions has risen because people are living longer, and the economic environment has fundamentally changed.
“Scheme members will realise that winding the clock back to 2011 and freezing the scheme in time is just not credible.”
— to www.ftadviser.com