Pushed for time? Here are the headlines…
- The expert panel, with both UCU and UUK elected reps, are unanimous in their view that retaining a Defined Benefits (DB) pension is both affordable and viable.
- The report is critical of the management of the USS pension scheme – this is also the unanimous view of the employee and employer elected panel members.
- As these views are unanimous, it may offer common ground for UCU and UUK to work from in future.
- We think the JEP represents significant progress compared to the offers that have been on the table over the last 12 months.
Earlier this month, following a period of almost a whole year, we were very pleased by the release of the Joint Expert Panel (JEP) report on USS: http://www.ussjep.org.uk/report-of-the-joint-expert-panel/
In this post, we share with you what we think are some of the key points from the report, highlight a key point of debate within the union, put the report in the context of the pensions dispute over the last 12 months, and suggest some possible next steps.
About the Joint Expert Panel (JEP)
Made up of three members suggested by UCU, three members by UUK and an independent chair, the JEP have produced a series of recommendations and conclusion which “are the unanimous views of the panel”.
Pensions dispute – key milestones in the last 12 months
- November 2017: UUK proposes to close USS defined benefit scheme, replacing it with one solely made up of defined contribution
- 23 February 2018: 14 days of strike action by UCU members commences
- 12 March 2018: UCU-UUK proposal, brokered by ACAS (rejected)
- Maintain DB up to salary threashold of £42,000 at accrual rate of 1/85th
- Member contributions would go up to 8.7%
- 13 April 2018: threat of further industrial action results in UCU members accepting the creation of the Joint Expert Panel, following a controversial e-ballot in which 64% of members accepted
- September 2018: JEP indicates resolution of 2017 valuation whereby
- Maintain DB up to salary threshold of £55,000 at accrual rate of 1/75th
- Member contributions could increase by 1.1% to 9.1%
2017 valuation in light of JEP findings
- One of three tests used by USS in the valuation (test 1) is criticised for being given far too much weight in determining the valuation, resulting in an overly conservative approach to risk by employers.
- The valuation fails to sufficiently reflect that USS is a large, cashflow positive scheme that can adopt a
- very long time horizon
- The JEP thinks the pension scheme is strong, and that USS’s approach dampens the scheme’s outlook
- It is suggested that employer appetite for risk “produced misleading results”.
While the JEP’s remit was not to re-do the 2017 valuation, it has suggested a way to conclude it (it remains unconcluded because the USS Joint Negotiating Committee could not agree, hence our strike). The 2017 valuation needs to get concluded before work on the next one (2020). Work on the 2020 valuation is due to start in six months time.
Common ground for future work between UCU and UUK
The criticisms listed above relate to USS itself. This is why we think the JEP reports offers an opportunity for employees and employers to unite over the issue of pensions for the first time in recent memory.
The JEP suggest adjustments that can be made to the 2017 valuation that would avoid the full implementation of the steep contribution rises we’re currently being consulted on. The JEP suggests that the 2017 valuation can be resolved with overall (ie. covered between employer and employee) contribution increases of 3.2%, removal of 1% match, but no change in earning threshold (£55,000) or accrual rate (1/75th)
Area of debate at the moment: who pays this 3.2%?
- Some argue that employers should foot the whole bill given that they took a ‘contribution holiday’ between 1997 and 2009 and that UCU should continue to push for ‘no detriment’ (ie. no increase in contribution, no decrease in benefits). See article from UCU Left: http://uculeft.org/2018/09/jep-reports-what-next/
- Others argue that maintaining a ‘no detriment’ position is simply no longer realistic and that it could risk scuppering the recommendations JEP has made. This line of thinking supports a position where the 3.2% is shared by employers and employees according to an established ratio of 65:35. USS members could therefore see a contribution increase of See article from Michael Otsuka: https://medium.com/@mikeotsuka/why-pushing-for-no-detriment-is-now-self-defeating-15225da4eed3
The JEP suggests there is plenty of scope for longer-term reform of USS: “The 2nd phase of JEP work should include a wider review of the approach & involvement of UUK & UCU in future valuations so that a more collaborative approach can be adopted & industrial action, such as that witnessed earlier this year, can be avoided”.
Likely next steps
- September: UCU’s Superannuation Working Group (in essence UCU’s negotiating group) endorsed the report as the basis for negotiation and asked branches and members to discuss its contents.
- 5 October: UCU’s National Dispute Committee meets to consider the dispute including the JEP report, next steps and how members should be consulted
- 7 November: UCU HE Special conference (which we’ll be sending a branch rep to) to review work of JEP
We also understand from UCU sources that
- USS are currently putting a timetable of meetings of its Joint Negotiating Committee (UUK and UCU) together for November and December
- UUK and UCU could put a joint resolution together agreeing to JEP recommendations to resolve the 2017 valuation.
- Convincing the UK government Pensions Regulator of the JEP’s recommendations will require some work, but refusal by them to implement recommendations by highly regarded pensions experts agreed by UUK and UCU would be politically dangerous.
We hope this is a useful synthesis of what’s a complex and evolving situation.