Information about the Joint Expert Panel, the USS Trustee's cost-sharing rules, and a member consultation.
The following briefing on USS has been prepared by the University’s Pensions Working Group in consultation with Cambridge UCU. It was sent as an email to all staff on Tuesday 26 June.
Following the recent period of industrial action over changes to the pension scheme and the 2017 valuation of the Universities Superannuation Scheme (USS), the University and College Union (UCU, representing scheme members) and Universities UK (UUK, representing scheme employers) agreed on the establishment of a Joint Expert Panel (JEP) to re-examine the valuation and to suggest a sustainable way forward for the valuation of USS. In parallel, UUK and UCU will discuss alternative scheme designs.
This briefing gives Cambridge members of the scheme more information on the work of the JEP and on plans for a consultation on the USS cost-sharing rule.
Joint Expert Panel
The JEP has now been formed. It is composed of six members, three each nominated by UCU and UUK, with an independent Chair. You can read about the six members here. The Chair is Joanne Segars, a respected figure within the pensions industry who has extensive experience both of public sector pension schemes and of the industrial relations environment in which they operate.
The JEP will make an assessment of the 2017 valuation, looking in particular at the assumptions and associated tests that formed the basis of the valuation. It will also agree key principles to underpin the future joint approach of UUK and UCU to the valuation of USS. You can read the full JEP terms of reference here.
The JEP has already held several meetings, and will continue to meet over the summer. It is expected to report in September. Information about the panel’s meetings is posted on their website.
Cost-sharing
The timeline for the JEP’s work poses a problem for the USS Trustee, which has a legal duty to complete the valuation by the end of June 2018 to allow any changes to benefits to be implemented by 1 April 2019. In an update sent to employers last week, the Trustee has indicated that it is willing to engage with the report of the JEP, and with UCU and UUK, to determine a way forward. However, the Pensions Regulator expects the Trustee to show that it has a “credible plan” for completing the valuation as soon as possible.
As part of that plan – and to provide assurances that it is ultimately in a position to address its statutory obligations – the Trustee has triggered implementation of the scheme’s cost-sharing rules. Detailed information on these is available on the USS website. In essence, they stipulate that, if employers and members cannot reach agreement on benefit reform via the Joint Negotiating Committee (JNC), and the cost of providing the current level of benefits has risen, the additional cost of providing the same level of benefits must be shared between employers and members. These costs would be shared so that 65 per cent of the additional cost was paid for by the employers and 35 per cent by members.
Implications of cost-sharing
The contested 2017 valuation calculated that contributions amounting to an additional 10.6 per cent of salary would be needed to provide current benefits in future (with the exception of the 1 per cent ‘match’ on DC contributions above the salary threshold, which will be automatically removed under scheme rules).
If cost-sharing is imposed, and there is no further agreement on benefit changes, an increase of 10.6 per cent would be split between employers and members. This means that members would need to pay an extra 3.7 per cent of salary into their pension and employers would need to pay an extra 6.9 per cent of salary in pension contributions on behalf of their USS members. This would raise total contributions from 8 per cent to 11.7 per cent of salary for members, and from 18 per cent to 24.9 per cent for employers. As these increases are significant, their introduction would likely be phased.
Any change in contributions or benefits requires consultation with scheme members. To prepare for the possible implementation of cost-sharing, a member consultation will be run over the summer. This would run in parallel with the work of the JEP. The University will, of course, provide information on the consultation as soon as it knows more, and commits to running open meetings for staff to explain the implications of any future developments. The next open meeting will be in July.
However, if there is a new agreement following the work of the JEP, the cost-sharing arrangement is likely to last for a few months only. In effect, it would act as a short bridging solution between 1 April 2019 and the implementation of the JEP’s new benefit arrangements, following agreement in the JNC and the completion of a member consultation.
It is important to note that the above numbers are not final, and may change following further analysis by USS.
Further Information about USS can be found on the University’s staff pages and from Cambridge UCU.