Fairness of 2022 USS Changes
Are the changes proposed for April 2022 fair?
The USS Rules state that if the Trustee determines that the scheme is underfunded, and no agreement can be reached, then the extra payments required will be split between employee and employer in the ratio 35:65. (Rule 76.8 of 2016 Rules, Rule 73.4 of the 2011 Rules.)
One can argue about the fairness of that, but that has been the rule for over a decade. It has some sense of a shared burden behind it, and the 35:65 split is close to the 32:68 split for total contributions which came in in 2011, but with a slight shift of future burdens towards the employees.
What is proposed for 2022 (and was proposed in 2018 and provoked strikes until it was withdrawn) is that the current "underfunding" should be addressed by significant benefit cuts for employees, and no loss at all for employers. There is no sharing at all, but employees are having to solve the entire problem themselves.
How did this arise? The JNC which exists to try to find an agreement between employers and employees was split with all the employees' representatives rejecting this plan, and all the employers' representatives supporting it. The casting vote of the chair favoured the employers, so an agreement is deemed to have been reached despite no-one from one of the two sides voting for it!
If we were being presented with a package which included pain on both sides, perhaps some cuts in benefits, but combined with increased contributions from the employers, it might be harder to reject so clearly. But with the changes in their current form, it is easy.
Had the UUK delegates on the JNC proposed the accrual rate reduction to 1/85th, the threshold reduction to £40k, and an increase in the employers' contribution from 21.4% to 25.4%, the Trustee would probably have been appeased, and the employers would have had a strong incentive to make sure that a more sensible deficit calculation was obtained soon. Moderates might have been less inclined to strike too. Note that the employers were committed to a 23.7% contribution rate, but are now going to pay just 21.4% (or rather 21.6% after their late concession).
My understanding is that the employers' representatives on the JNC are:
Carol Costello, University of Liverpool (HR)
Phil Harding, recently at UCL (Director of Finance)
Stuart McLean, UUK (Head of Pensions)
Margaret Monckton, University of Nottingham (Chief Financial Officer)
Anthony Odgers, University of Cambridge (Chief Financial Officer
Members at Liverpool, Nottingham and Cambridge may feel particularly disappointed in their employers.