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The union representing tens of thousands of staff at UK universities has warned of “chaos” on campuses after surprise plans were unveiled to replace their guaranteed pension benefits with riskier retirement plans.
The warning of strike action came after Universities UK, which represents 350 university employers, said it would stop offering staff traditional “defined benefit” pensions, which offer a certainty of income in retirement.
Instead, the UUK on Friday unveiled proposals to shift staff into a riskier, less generous “defined contribution” plan, which offers no assured pension, to help deal with rising costs as many private sector companies have done.
The University and College Union, the trade union for higher education staff, said a DC scheme could lead to a final pension worth only around 20 per cent of the “best” defined benefit schemes.
Anger has been growing across UK university campuses since July, when the Universities Superannuation Scheme, the sector’s main retirement fund, asked for an extra £500m a year in cash contributions from both university employers and employees because of a £5bn funding hole.
“After months of negotiations these plans are a bolt from the blue,” said Sally Hunt, general secretary of the UCU.
“It is categorically the worst proposal I have received from universities on any issue in 20 years of representing university staff. If universities continue to pursue this action, they will face disruption on campus of a kind never seen before.”
The UCU will begin balloting its 40,000 members in late November, a move it said could lead to “chaos” on campuses if staff vote to walk out. Members will be asked to back industrial action that would bring “substantial disruption” to around 50 of the largest and best-known universities in the UK, including Oxford, Cambridge, Imperial and Manchester.
But UUK said most universities could not afford to pay more into pensions without diverting money from other areas, such as teaching or research.
“Increasing contributions could damage the high standards that students, research funders and others rightly expect,” said Alistair Jarvis, chief executive of Universities UK.
“Change is needed to address the scheme’s deficit and the rising cost of future pensions. Our proposals for reform will tackle the scheme’s funding challenges so that universities can continue to offer attractive pensions benefits to staff.”
The UUK added that the threat of industrial action by UCU was “premature and disappointing” as a series of meetings was planned to discuss USS pension benefit reform”.
The UCU said action would include a series of strikes in February, as well as other measures — such as refusing to cover or reschedule classes, or cover for sick colleagues.
The ability of British universities and staff to make the extra contributions to protect the future benefits of the sector’s £60bn retirement fund was questioned by the Pensions Regulator, in a confidential letter seen by the FT.
The USS fund has 400,000 members. Universities currently contribute 18 per cent of employees’ salaries to the scheme; employees contribute 8 per cent, for a total contribution of 26 per cent per member. This would have to increase to 32-33 per cent to keep retirement benefits in their current shape.
The UUK proposal would see future benefits delivered by the existing DC section of the USS plan, which the organisation said provided a “market leading” arrangement for its type of pension. The employers were also committed to maintaining their USS contribution of 18 per cent of salaries. Retired members are not affected by the proposals.
“Moving from DB to DC is the only sensible way for UK universities to manage pension risk, and is exactly what almost all private sector companies have already done,” said John Ralf, an independent pensions expert.