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For staff


The following message was sent to all USS members at Cambridge on 1 March 2022 via the USS bulletin.

Dear colleagues,

I am writing further to the Vice-Chancellor’s message of last week on USS. Like the Vice-Chancellor, I too am keenly aware of the disappointment and anger that many of you have felt over the recent decision to not support the UCU proposal. I feel it is important to explain the decision and to reassure you that our position on USS has not changed, and we will continue to strive for better pensions. 

As many of you will know, as well as considering an amendment to defer the imposition of the 2.5% inflation cap, USS employers considered whether to support alternative proposals put forward by the University and College Union (UCU).

The proposals put forward by UCU and considered by employers as part of a formal consultation were as follows:

  • That UUK call on USS to issue a moderately prudent, evidence-based valuation of the financial health of the scheme as at 31 March 2022, to be issued for consultation in June (at the latest) 
  • That employers agree to provide the same level of covenant support as for their own proposals to facilitate a cost-sharing of current benefits throughout the 2022/23 scheme year, starting on 1 April 2022 at 11% member/23.7% employer until 1 October 2022, and 11.8%/25.2% thereafter 
  • That employers agree to pay a maximum of 25.2% and members a maximum of 9.8% from 1 April 2023 so as to secure current benefits or, if not possible, the best achievable as a result of the call on USS to issue a moderately prudent, evidence-based valuation.

While USS employers were in favour of the deferral of the inflation cap, they overwhelmingly did not support the alternative UCU proposals and therefore mandated their JNC representatives (of which I am one) to vote to defer the 2.5% inflation cap but not to support the proposals put forward by UCU. As the Vice-Chancellor said, this will mean that USS members will face cuts to their future benefits from April this year.

The University did not support the UCU proposals but did agree to support the deferral of the inflation cap. While not a major change in its own right, the deferral of the inflation cap is important because it protects members from high levels of inflation in the short term, is an important signal that a 2.5% inflation cap should not be normalised into benefit design, and buys a realistic amount of time to find a way to remove the cap permanently.

Members will understandably want to know why the University did not support the UCU proposals. A Notice outlining the Council's decision has been published online and will appear in tomorrow's Reporter. The main reasons are as follows:

  • There is no clear evidence that a 2022 valuation would deliver an acceptable cost for the current benefits, in large part because in all likelihood the valuation methodology adopted by the USS trustee and regulator would not differ meaningfully from the approach they have used in the most recent valuations
  • Additionally, a 2022 valuation would almost certainly delay the evaluation and implementation of a long-term sustainable solution (see below)
  • As many people have pointed out, the scheme’s assets have increased substantially since the valuation date of March 2020. However, USS has signalled that the reduction in deficit contributions would be largely offset by the increase in the cost of future benefits. A material change is only likely with significant reform to the scheme and approach to risk from USS. Without this, even the contribution increase to 35% of salary as proposed by UCU would not avert the large majority of the benefit cuts from April 2022 (albeit they would be deferred until April 2023)
  • Pursuing a 2022 valuation would detract attention from exploring an alternative scheme design, which the University believes is the most likely way of restoring benefits on a sustainable basis.

Some members may be concerned that this decision signals a change in the University’s position in relation to USS. It emphatically does not. I want to be clear that the University will continue to push for benefits to be restored on a sustainable basis as soon as possible. Contributions of 25-30% of salary should be sufficient to deliver a good defined benefit pension despite the reductions in long-term return expectations that have occurred over the past decade. The fact that within the present USS structure they do not is a result of the actuarial and regulatory methodologies adopted by defined benefit pensions in the UK, and the application of these to USS (which as an open scheme with a strong sponsor covenant is significantly different from most UK schemes).

There are a number of things that need to happen for benefits to be restored and perhaps improved in the long term. All stakeholders need to work together to explore a new scheme design. The regulator needs to be convinced that risk is managed appropriately. USS needs to ensure its investment strategy is appropriate for the scheme. 

On this last point, it is important that USS does not – as it intends to – move more of its portfolio into lower return assets. The University, along with Oxford and Imperial, has written to USS Chief Executive Bill Galvin to voice its concerns on plans to alter the asset mix.

With appropriate scheme design, investment strategy and risk metrics, it should be possible to return USS to being a nationally and internationally competitive pension scheme. It will, though, take a at least one to two years to do this, and will need USS, UUK and UCU to work together rapidly to achieve it.

I will be in touch again shortly with details of an open meeting where you can learn more about the current situation and have your questions answered.

Anthony Odgers
Chief Financial Officer