Russell Group response to USS JNC decision on 2020 valuation

01 September 2021

After the USS Joint Negotiating Committee (JNC) decided in favour of the package of changes put forward by employers as a response to the USS 2020 valuation at its meeting yesterday (31 August), a Russell Group spokesperson said:

“Following many weeks of discussion, the JNC’s decision to progress the employers’ reform proposals means USS members will be consulted on an offer that puts the scheme on a more sustainable footing, provides a competitive pension with a valuable defined benefit element and ensures staff will not see big reductions in take-home pay.

“Employers have shown their commitment to finding a solution for staff that protects them from constantly rising contributions by agreeing to unprecedented levels of covenant support worth £1.3billion a year.

“We recognise this is a challenging situation for staff and making changes to contribution rates or future benefits is never easy, but it is only done when absolutely necessary and pension benefits earned to date are secure and unaffected. The need for changes to the scheme has also been acknowledged by UCU.

“As this valuation comes to a close, we must all now work together to find a long-term solution that provides better value for money and does not place an unfair burden on future generations. Our view remains that a pension scheme backed by a contribution rate of 30.7 per cent shared between employers and employees should be sufficient to provide a stable, comfortable income in retirement.”

Further Information

The employers’ proposal for changes to the scheme, required to meet its 2020 triennial valuation, includes:

• minimising increases in contributions to the scheme by members to no more than 0.2%, and employer contributions to 0.3%, meaning that members’ contributions would only rise from 9.6% to no more than 9.8% of salary.
• maintaining the scheme’s Defined Benefit /Defined Contribution hybrid model with Defined Benefit applying up to a salary threshold of £40,000, and retaining Defined Contributions at an overall 20% of salary above that threshold.
• employers to offer further, stronger covenant support measures including a moratorium on exit, debt-monitoring and ensuring that pension promises are even more secure through protecting the USS Trustee’s status as a creditor.
• a commitment that should the scheme’s financial situation get better then improvements to benefits can be considered rather than reducing contribution rates.
• addressing the high opt-out rate, which sees around 20% of members choosing not to join the scheme and losing out on the 21.1% employer contribution, by giving eligible members the choice of a new lower contribution option.
• a major new review of the scheme’s governance, and exploring moves to a conditional indexation model, which pegs a part of annual pension provision to the performance of scheme funds, via a working group of members’ representatives, employers, and USS.

Across every career stage, benefits which members have already earned within USS are protected by law and secure, and the employers' package, and in particular the unprecedented additional covenant support measures provided by employers, further strengthens that protection.

Following the statement by UCU after yesterday’s JNC meeting, USS Employers which is the formal representative for employers in the scheme published the following Q&A.

At the JNC did UCU table their own proposal for changing the scheme?

We have not received an alternative formal proposal from UCU for decision by the JNC. The JNC decision on the UUK proposal was passed by the casting vote of the JNC Chair, after UCU decided not to table their own formal proposal. We repeatedly said to UCU during the JNC process that UUK would be willing to put any UCU suggestions to employers to seek their views and that offer still stands. Up until this point, UUK has not been allowed to even discuss the union’s suggestions for benefit reform publicly – indeed it remains unclear if the UCU suggestions have the support of its members. The upcoming member consultation on the UUK package is important and open - and could lead to these proposals being amended. Employers will still consider alternative benefit structures and formulations, provided they are viable, affordable and implementable.

Why did employers not agree to a further one month extension of the JNC discussions as proposed by the UCU?

UCU did not ask for a one-month delay to the JNC timetable as they claim. Over the last 18 months of discussions, the USS Trustee has made it clear throughout that without a solution to the 2020 valuation emerging from the JNC both employers and members would be forced to pay much higher contributions than at present from October 2021. The JNC has already formally had four and a half months to discuss the valuation outcome (already extended by 6 weeks) in addition to the time prior to that. Given the lack of a UCU formal proposal to the JNC it was not apparent that any further time would be productive and a further month of JNC deliberations would almost certainly have led to the imposition of these higher costs by the USS Trustee – starting with member rates rising to 11% from October 2021, with employer rates due to increase too if decisions were further delayed. This would damage the student experience and cost jobs, as employers would be forced to move money from other budgets to pay more into pensions, and priced even more members out of the scheme leaving them without pension savings.