Transcript 140911 Southampton UCU GM on USS

USS Governance
WHO IS INVOLVED IN SHAPING THE USS SCHEME?
There are four key actors with a considerable influence on the shaping of
our pension scheme:

The USS Corporate Trustee (the USS Board)

The Employers

UCU

The Pensions Regulator (tPR)
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
Changes to USS in 2011
Prior to 2011, the USS pension scheme was organised as follows:



All pensions were Final Salary Pensions.
Your pension was your final salary times the number of years you were in it
divided by 80, so for 40 years you got ½ of your final salary, plus 3 times that
as lump-sum.
Once you’ve retired your USS pension was increased with the RPI inflation
index
On 10 May 2011, detrimental changes were finally forced through the USS
Joint Negotiating Committee (JNC) against UCU’s wishes. Although we
were successful in defending the position of the final salary scheme for
existing members, there were some changes.
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
Changes to USS in 2011, continued...
The changes introduced were:





Existing members stayed in the Final Salary section, but contributions
increased from 6.35% to 7.5% of salary.
Removal of the right of members over 55 made redundant to be able to retire
with an unreduced pension.
New members went into the Career-average (CRB) section and contribute
6.5% of salary. Each year of salary is re-valued by the cumulative CPI
inflation index from that year to the year of your retirement (except for any
years when CPI is >5%) before the average is calculated, and your pension
is that average times the number of years divided by 80.
For both sections, once you retire your pension gets increased with CPI
instead of RPI, a decrease of typically 0.8% per year, and only if CPI<5%.
The lump sum of 3 times pension exists in both sections.
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
Why are further changes proposed?
The deficit or surplus of a pension scheme is the difference between its assets
and its liabilities. The UK Pensions Regulator requires each pension fund to
perform a formal valuation every three years and agree a recovery plan within 15
months of the valuation date if it indicates a deficit.
In the last few valuations, the USS pensions scheme has been in deficit.
March 2011
(Triennial)
March 2013 March 2014
(Provisional
Triennial)
Assets
£32.4bn
£38.6bn
£39.1bn
Liabilities
£35.3bn
£50.1bn
£46.1bn
Deficit
£2.9bn
£11.5bn
£7.5bn
Funding
Ratio
92%
77%
85%
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
What are the proposed changes?






Existing Final Salary members move to Career Average (CRB) for further
accruals, so all members are in CRB except those who have already retired.
Employees’ CRB contribution rates rise to 7.6%, employers’ 18%.
Past accruals for Final Salary members are converted to use the salary in
the year of the change instead of the salary at retirement (or maybe the
current best 3 out of previous 13 years rule is applied), re-valued with CPI
from the change to the year of retirement. We believe that this could result
in considerable losses for current members of the scheme.
For future accruals CRB applies only to salary up to a cap, suggested at
£40k.
Contributions for salary amounts above the cap go into a defined
contribution scheme.
In the longer term, UCU is concerned that this could result in all pensions
moving to considerably less generous defined benefit arrangements.
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
Modelled Example of changes
Assuming an annual pay settlement 1.8% above CPI, which is what was assumed in
the 2011 USS valuation, and using one particular quote for an annuity, I’ve modelled
the pensions of various types for an example academic career path.
This is based on an academic who starts at grade 4, point 29 at age 25, increments
annually until reaching the top of grade 6, point 52 at age 48, and retires at 65.
Please note that the final line is italicised to indicate that this estimate is highly
uncertain.
Pension
Type
USS
Pension
State
Pension
Total
% of final
salary
Final
Salary
£29,957
£5,881
£35,838
60%
CRB on full
salary
£18,787
£5,881
£24,668
41%
CRB to
£40K
£14,088
£5,881
£19,969
33%
CRB to
£40K + DC
as annuity
£16,742
£5,881
£22,623
38%
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
Timetable for Further Talks
UCU Decision making Friday 19 September
conference
To discuss report from
UCU negotiators and
decide next action
USS Board
24 September
Important Valuation
assumptions and technical
provision for consultations
USS JNC
22 October
Proposed scheme design
formally tabled
USS JNC
13 November
USS likely to want scheme
design settled
USS Board
20 November
Finalise technical
provisions and agree
terms of consultation
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
UCU proposed negotiation position
UCU has been running a consultation process, and as a result have proposed
the following principles:
a.
b.
c.
Recognises that the funding situation will require an increase in employer
contributions and that pension provision should be set at a level which is
affordable for the institutions in the long term;
Considers it vital to maintain a defined benefit scheme;
Acceptance that there could be a limited increase in employee
contributions in return for benefit improvements to the CRB section;
d. Considers that any changes to the benefit structure should provide for intergenerational fairness and benefit the vast majority of members in the future;
e.
Requires any improvements in the funding position to be used to improve
defined benefits.
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
UCU Conference on USS
On 19 September, UCU branches will be asked to consider:






Authorising a ballot for industrial action to take place between 1 to 20
October
Authorising a ballot for action short of a strike between 1 to 20 October
The primary purpose of seeking an early ballot is to ensure that our
negotiators can demonstrate the strength of UCU members resolve to
defend their pensions when they enter negotiations on 22 October.
Any industrial action, or action short of a strike, should be staged and
responsive to the speed of the imposition to any changes to the pension
scheme.
That if necessary, action should commence with implementing an
assessment and examination boycott in the Autumn term.
That UCU should publicly challenge the valuation methodology adopted by
USS, which justifies the employers proposed changes
University of Southampton UCU
General Meeting – Proposed changes to USS pensions
UCU response to USS changes
Southampton UCU representatives will be
attending the UCU decision making conference
in Manchester on 19 September.
Southampton UCU representatives will seek to
reflect the views of our members at University
of Southampton.
Questions? Comments?
University of Southampton UCU
General Meeting – Proposed changes to USS pensions