Another unnecessary USS contributions increase (and link to Jo Grady’s talk)

Dear friends and colleagues,

This week you will have received a message from HR explaining that as of 1 October, your contributions to USS have increased to 9.6% (note: when we went on strike, our contributions were 8%). The email also stated that this increase means that “the current level of benefits is retained at a lower contribution rate for both members and employers than had been set out in the 2017 valuation.” Whilst this is true, it fails to acknowledge three key points.

First, research done during the 2018 USS strike demonstrated that the contribution increases deemed necessary by USS at the time were based on a flawed methodology and politicised assumptions against defined benefits schemes. This research fed heavily into the first Joint Expert Panel (report), and has also been submitted to the second report, due imminently, that addresses valuation methodology and governance of the scheme and is aimed at finding a long term solution to maintaining the sustainability of the fund and our contributions as well as resolving issues such as intergenerational fairness and the gender gap. The first JEP report (JEP1) was a compromise, making numerous wide-ranging criticisms of USS, including the problematic Test 1, and offering a few concrete proposals for immediate changes to the valuation that would allow for completion of the 2017 valuation (the one that led to proposals to turn USS into a defined contributions rather than defined benefits scheme). Based on the data used for the 2017 valuation, the JEP determined that the implementation of the panel’s recommendations would result in an acceptable total contribution rate (i.e., the employee’s contribution plus the employer’s contribution) of 29.2%. This is far from the 35.6% rate that USS claimed was necessary following the 2017 valuation.

It is important to note that these recommendations were unanimously supported by the JEP members. It is also important to note that both UCU and UUK welcomed the JEP report, and the actuarial advisors for both UCU and UUK declared that the recommendations were acceptable, compliant with regulations, and would be their preferred outcome for the valuation. USS internal calculations, shown to members of the USS Joint Negotiating Committee (made up of negotiators from UUK and UCU), demonstrated that JEP recommendations applied to a 2018 valuation would result in a total contributions rate of about 26%, the rate that was set during the 2014 valuation. However, USS was insisting that additional mechanisms be put in place to mitigate against risk. Despite employers agreeing to accept a higher level of risk in order to bring down contributions, this was the start of USS gradually rejecting the JEP proposals. Our employers did not push back against this. There is some speculation that some employers are concerned about increasing pensions risk as that will impact upon their ability to secure funds needed for capital investment. At Keele UCU, we like to believe that our own employer is not one of them.

We ended our strike action in 2018 on the promise of a panel of experts evaluating and analysing the pension fund, and on the promise of both us and our employers accepting and implementing the outcome. To date, the outcome has not been implemented. With the JEP’s second report (JEP2) imminent, and with work on setting the methodology for the 2020 valuation starting this autumn, UCU has grave concerns not only about the 2020 valuation, but also whether USS will implement any of the JEP recommendations, including the more long-term recommendations of JEP2.  

Second, the email from HR fails to note that our contributions will increase to 11% in October 2021 – the 9.6% is a short-term rate that will be superseded by the 2020 valuation. With expected contributions already set at 11%, and with the high probability of the 2020 valuation not implementing any of the JEP recommendations, it is almost certain that our contributions will again increase significantly in October 2021. They may not rise to as high as 11%, but USS will present anything below that rate as a win for members. Our employers, though, will not accept such a high contribution rate. This means that we will be back to where we were with the 2017 valuation, with proposals to close the defined benefits scheme and to turn USS into a defined contributions scheme.

Further, if contributions rise and benefits worsen, there is a risk that members will find USS unaffordable and will opt out. This would harm the scheme’s cash flow and destabilise its long-term investment strategy. The same threat to cash flow occurs if our salaries fail to keep up with inflation over a long period of time, as has been the case in the past ten years.

Our pensions are not safe.

Third, the increase to a 9.6% contribution is not an act of benevolence or generosity on behalf of our employer. Rather, it is the result of UUK failing to live up to its promise regarding the implementation of the JEP recommendations. And if they will not uphold JEP1, can we trust them to uphold JEP2, where recommendations for longer term changes to the valuation methodology and governance of USS are expected?

UCU’s negotiators are tasked with getting the best deal possible for UCU members, and for all staff who contribute to the USS scheme. UCU’s position is quite clear: JEP1 must be implemented, resulting in, according to USS’s own calculations, no increase in contributions for either staff or employers. If UUK will not work with UCU to ensure that this happens, then employers (specifically, UUK members that are part of the USS scheme) must pay the increased costs that are a result of UUK’s failure to do so.  

At this point, UCU is not asking for governance reform, as indicated in the email from HR. We do, however, expect that recommendations pertaining to governance reform within the JEP2 report be implemented. As UUK is a very interested party in ensuring the continued strength of USS, and agreed to abide by JEP recommendations in the agreement that ended the 2018 strike, we expect that they support UCU in ensuring that this happens.

When UCU General Secretary Jo Grady was on campus earlier this week, she outlined some very stark consequences of increased contribution rates to members, and to the overall health of the fund. We understand that this is a busy time of year so some members could not attend her meeting. We recorded it, though, and you can watch it here (it’s on Twitter, but you do not have to be signed up to Twitter to view it).

For further explanation on USS’s retreat from the implementation of JEP, here is a recording of UCU negotiator Sam Marsh explaining what has taken place.

UCU negotiator Sam Marsh has also written a USS Brief on why now is the time to take action in relation to the setting of the 2020 valuation methodology.

No one wants to go on strike. It’s disruptive, it’s expensive, and to be perfectly honest, we all have better things to be doing. However, our pensions are our deferred pay, and due to seemingly constant changes to USS we have already lost hundreds of thousands of pounds since 2011. We are again at serious risk of losing even more, and of making USS completely unaffordable for low paid colleagues and for future members, including those on who are on casualised or precarious contracts who for various reasons may not pay into USS now but hope to do so in the future. If it seems like we’re right back to 2017, you’re right in thinking that. We need our employers, through UUK, to work with us in order to secure our future. They are currently not willing to do that, so we have no choice but to obtain a mandate for strike action.

Vote YES for strike action and YES for action short of a strike to secure our future, and the future of the next generation of workers in higher education.

In solidarity,


KUCU Branch Secretary (on behalf of KUCU Committee)