A message from the Principal, 8 March 2018
An email sent on behalf of Colin Bailey, Principal
8 March 2018
I write to you as the second week of industrial action draws to a close. The impact of the strikes is becoming clearer, and I am extremely sorry that some of you are seeing disruption to your classes. We wrote to you last week to explain how we will ensure that you are not disadvantaged in relation to assessment as a result of the industrial action. We are working hard with Schools and Institutes to see how any missed teaching can be replaced, for example by rescheduling where possible, or through using other means. We are looking at this on a course-by-course basis. If you have any questions, have a look at the frequently asked questions (FAQs) or speak with your School/Institute.
These are difficult times for staff and I understand their concerns. The proposed changes would have a significant impact on USS scheme members’ pensions. I’m in constant contact with Universities UK (UUK), who are representing universities in these discussions, and will continue to try and find a solution that provides the best pension benefits possible for staff and is affordable and sustainable. The Universities and Colleges Union (UCU), who represent employees, and UUK are now in talks that are being mediated by the conciliation service Acas. This is the fourth day of talks and I understand that progress is being made.
The rest of this message provides some answers to questions raised by staff in open meetings and via other communications. I am very happy to answer questions about any of these issues at the next open meeting with students, tomorrow, Friday 9 March.
The deficit in the USS pension scheme
The deficit in this scheme has been valued at £7.5billion. Both UUK and UCU agree there is a deficit, although they disagree about how it should be addressed. Some have called for the Government (and general tax payer) to underwrite the £7.5bn deficit in the USS pension scheme. I do not think that this is a realistic expectation. The pension scheme was valued twice, once in September and once in November. There have also been comments about the difference between the September and November valuations. The Pension Regulator, a Government body that oversees all pension schemes, provided their views on the level of risk contained in the September valuation (Queen Mary indicated that it would support this level of risk in its response to UUK at this time). Following this input from the Pension Regulator, and also that of its covenant advisors, the USS Trustee Board – the individual members of which have legal responsibility for the scheme – agreed to a revised valuation in November. This is why I have pushed for the latest talks to include the views of the Pension Regulator (as well as the Trustee themselves), since their agreement is vital to the identification of an alternative solution to the one currently agreed by USS. I understand their views are now being taken into account in these latest talks.
Universities currently pay 18% of salary into this pension scheme, and scheme members pay 8%. In September 2017, universities who are members of the scheme were consulted by UUK about whether they would be willing to increase this contribution. The majority, including Queen Mary, said no. A number of universities have now changed their position and have said that they can increase their contributions from 18%, with a resulting increase in individual contributions above 8%. Our pay costs, in relation to our income, are one of the highest in the sector and the highest in the Russell Group. We would find it difficult to increase contributions above 18% and if we had to then, realistically, we will have to look at cuts to absorb this cost. This is why I’m struggling to support an increase in university contributions.
Member benefits of the USS scheme
Pension schemes are either a defined benefit (DB) scheme, where your income in retirement is a percentage of your previous earnings, or defined contribution (DC), where you and your employer put money into a pot that you can use flexibly when you retire. The current scheme is a defined benefit scheme up to a salary of £55,550. Defined benefit schemes undoubtedly provide more certainty to employees in their retirement and are likely to provide a higher level of pension income, but they are also more expensive to provide. Almost all of the private and third sector now operate defined contribution schemes.
The changes to the USS scheme currently proposed push the defined benefit down to zero, and effectively make it a defined contribution scheme. I will continue to push for a ‘sliding scale’ of defined benefits, so that if a future valuation of the scheme is more positive then defined benefits can be reinstated. I strongly support the identification of a framework by UUK and UCU that would guarantee that an increase in the defined benefit threshold would be the first priority in the event of an improved valuation. In addition, the current 18% from employers is only guaranteed for a short period, and could theoretically drop in the future. Again, I have pushed for the employers collectively to guarantee that contributions would not reduce below 18% for a significantly longer period (of between 10 to 20 years).
How will this end?
Staff have asked me where we think we might end up following the latest developments. This is difficult to answer. The current USS proposal – which pushes defined benefits to zero, and makes it effectively a defined contribution scheme – is affordable and sustainable, and the consultation with members of the scheme is due to start soon. The alternative UCU proposal that has recently been tabled increases contributions and also reduces the pension received (due to lower accrual rates), but keeps the defined benefit salary level at £55,550. This is being reviewed via the current talks and it remains to be seen whether it will be acceptable to the Pension Regulator and USS Trustee. We may end up with a proposed defined benefit scheme at a lower salary threshold, with corresponding increases in contributions from the universities and individuals. This could mean that the risk to the sector will increase and may lead to further problems in terms of the sustainability of the pension scheme in the future. Also, as I mentioned, any increase to employer contributions will result in Queen Mary having to make difficult decisions and cutting our costs elsewhere. However, this is a national scheme and we will accept the national decision.
I will continue to work with UUK and others to find a solution to the issues that we are facing. I do understand the concern expressed by staff and students, and the depth of feeling being expressed. I ask everyone, however, to show respect for all staff and students whether on the picket line, on social media and through other communication channels.
I am holding another open meeting this week and will be happy to answer any questions you have at that meeting.
USS website: www.ussco.uk/how-uss-is-run/valuation/valuation-qa