USS Politics

To a scientist like me, politics can sound boring. It can also sound negative if phrased as "whom to blame". But it is necessary to consider, and should be considered as "who has the power to make things better."

Employer, UCU, JNC, Trustee and Regulator

Regulator

The Pensions Regulator (TPR) is a government body charged with ensuring that Defined Benefit pension schemes do not go bankrupt. If they do, then the government-backed Pension Protection Fund has a large bill, and that the government finds undesirable.

Trustee

The Trustee (a committee, the USS Board of Directors) is responsible for running the USS. Again, it primary responsibility is to ensure that the scheme does not go bankrupt. It needs to approve any changes to contributions or benefits, and it can be ordered to make changes by the Regulator. It consists of three UCU appointees, four UUK appointees, and five independents.

Although the Trustee is responsible for the contribution rates, benefit rates, and the calculation of whether or not the fund is in deficit, all of these decisions need the agreement of the Regulator.

One open question is whether the Regulator would accept a somewhat modified methodology for calculating the deficit.

JNC

Proposals for contribution rates and benefit rates are produced by the JNC (Joint Negotiating Committee). This committee has equal numbers of employer and employee representatives, and an "independent" chair. Employers are represented by UUK, and employees by the UCU.

The Trustee may decided that the JNC's arithmetic does not add up (perhaps after being encouraged to decide this by the Regulator). At that point, it can set the overall contribution rate itself, and leave the JNC to argue about how it is to be divided between employer and employee. This happened for the proposed 2022 changes. The JNC's view was that even the Trustee would agree that the benefits proposed could be funded with a total contribution rate of 30.7%. The Trustee disagreed, and insisted on 31.2%.

UCU

The UCU is the sole formal representative of employees in this scheme. As far as I can tell most USS members are not UCU members, most UCU members are not USS members, and I cannot justify the idea that USS members have to pay perhaps £300 pa to be part of the organisation which represents their views to the USS.

The UCU naturally supports low member contribution rates coupled with good member benefits.

Employers / UUK

There are rather a lot. Every "pre-92" University, all but one of the Oxbridge Colleges, and a few others. "UUK" is the employers' organisation that represents their interest to the USS. UUK consists of all UK Universities, not just the pre-92 ones, and none of the Oxbridge Colleges. There are about eighty post-92 UK Universities, which is about half of UUK's membership.

UUK appears to do a slightly better job of consulting its non-members than the UCU does, but the position still looks strange to me.

The USS employers have the ultimate responsibility for stopping the USS going bankrupt. It is a "last man standing" scheme, so each employer is potentially responsible for the whole debt, not just the fraction that could be attributed to its employees.

UUK's primary interest is a mixture of reducing its contribution rates and stopping the scheme going bankrupt.

Oddities

Most Defined Benefit pension schemes are (or were, until they closed) single employer schemes. The USS is a multi-employer scheme, and represents a whole sector of the economy, a sector which receives heavy state support. (The argument that the post-92 Universities are part of the same sector is a little weak, in that, in general, they are not regarded as research Universities with an international standing.)

Yet the Regulator treats the USS in a very similar way to a single-employer scheme. Single-employer schemes are much more likely to have their employer fail. Can one really imagine the Government letting every pre-92 UK University fail? The Regulator clearly can.

The multi-employer nature of the scheme has another serious consequence. My University (Cambridge) can hardly deny that it could afford significantly higher contributions, particularly in the short term. However, other Universities are not able to do so. UUK is unwilling to set different contribution rates for different Universities. That might not even be legal. But it is also unwilling to set a contribution rate which bankrupts a University. If the government did allow a couple of Universities to fold (and there is no strong reason for it not to do so), the USS's problems merely increase, as the deficit recovery payments from those institutions would cease.

A multi-employer scheme might work if all the employers had similar financial strength, but that is not the case for the USS. It might work if each employer was responsible merely for the deficit in respect of its own employees, but that is not the case for the USS.

If, theoretically, the scheme were partitioned so that each employer was responsible merely for the deficit in respect of its own employees, the impact would be dramatic. The assets of the scheme which are attributed to rich employers would be permitted to be invested in a more risky, but ultimately more rewarding, manner, whereas poor employers would be force to hold there assets in low risk, low yielding investments, and they would also find that the Pensions Regulator would increase they Pension Protection Fund levy. So rich employers would pay less, and poor employers more. By not partitioning the scheme like this, there is a considerable subsidy from rich employers to poor employers. It is unclear how morally justified this is when some of the poorer employers seem addicted to expensive, debt-funded, building projects.

It also undermines the credit rating of the richer employers, which will increase their costs both when applying to loans, and when running employer-underwritten DB pension schemes for those of their staff who are not USS-eligible, the lower-grade support staff.

The scheme could (probably) be partitioned for future contributions. For past benefits, it could not without the consent of those with pension assets in the scheme. They are unlikely to consent without some incentive.

Striking

I want to strike against the University of overpaid VC whose ambitious building plans (based on loans) has left his University unable to pay larger contributions into the USS, and thus caps the USS contribution rate for all employers. I also want to strike against the Regulator and Trustee, whose prudence I find excessive.

But I cannot. I can only strike against my own employer. Do I have a moral case for doing so? Whilst Cambridge might claim not (I have not asked) on the basis that the USS rules effectively prohibit it from leaving the USS, and certainly prohibit it from offering me an alternative scheme whilst it remains in the USS, and it has not ruled out paying more to the USS, I disagree.

Cambridge decided to join the USS, and Cambridge could offer a top-up pension scheme in addition to the USS (as far as I understand the USS rules). It could also decide to offset my lost pension by moving all of its USS staff a couple of points up its payscale. And whilst in recent years Cambridge's influence on UUK has been positive, it is not clear that it was in the past.

Finally, it could agree with the Trustee that current benefits are maintained, in return for a much high contribution rate. The increase need not be split 2:1 between employer and employee -- the employer could pay it all. Many USS employers would claim that this would bankrupt them. But one could try calling the Government's bluff. Would the Government really allow a significant number of Universities to fail simply in order to support some rather distorted accounting from its Regulator?