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180216 Open letter to the VC Sir David Bell

Dear Sir David,

Many thanks for making public your position over the current pensions dispute. Although this is welcome, we are very concerned over apparent grave errors and omissions in your stated position. This is based on the following considerations to which we call on you to respond.

Firstly, and most importantly, neither yourself nor UUK have explained why they endorse the extreme degree of risk aversion applied in USS’s actuarial evaluation. The supposed deficit is an artefact of this, as in fact the scheme reaps more revenue in a given year than it pays out in pensions, and also has over £60bn in reserves. In the wake of the 2007-8 financial crisis, UK institutions have generally been asked to adopt a very conservative approach to meeting their pensions liabilities, which in effect asks, “If the organisation goes bankrupt, how will it meet its obligations?” Whilst this might be an appropriate scenario for an individual private company, like Rolls Royce or British Aerospace, it is wholly inappropriate for the University system which pools risk across 68 institutions. In the unlikely event that Reading were to go bankrupt, that is, under the current arrangements the other 67 institutions underwrite its staff’s pensions. This is a key reason why independent actuarial evaluation of USS conducted by First Actuarial gave USS a clean bill of health, concluding “The current employers’ contribution rate of 18% of pensionable pay, of which 15.1% goes towards defined benefits, is prudent. The asset income which is required, in addition to contributions, to pay the benefits in full is low. Indeed, in a scenario of “best estimate” pay rises, the benefits of the USS can very nearly be paid from contributions, without reliance on the assets.”

Please could you therefore explain why UUK have not pointed this out to USS or the pensions regulator, instead of endorsing a “one size fits all” approach which is wholly inappropriate for the HE sector? We also call on you to explain to staff why very different assumptions were adopted in UUK’s commissioned evaluation of its proposed alternative, when as had been pointed out here, applying a consistent approach would more than eliminate the supposed deficit. If the same assumptions were applied to USS, the situation could be resolved simply by agreeing to use this approach. On the face of it, this inconsistency, and the inclusion of the state pension into the estimated benefits from its own scheme, amounts to transparent duplicity on the part of UUK and a crude insult to the intelligence of University staff.

You estimate that UCU’s counter proposal, which was not intended as a fixed position but to get UUK to engage in meaningful negotiation, would cost £500m per year, but neglect to mention that any increased costs would be shared across the 68 institutions, or that Reading is a relatively small University. Please could you therefore estimate a realistic figure for Reading and give full details of how you arrive at it? Staff exposed to the extravagant “Limitless” campaign may find it hard to believe that funds could not be found to secure the future of academic staff into retirement, especially when the University has recently written off over £50m for the Malaysia campus and has wasted £36m on management consultants for the chaotic and dysfunctional PAS restructuring. This would be even more affordable if the University system also stopped squandering precious resources on competitive building projects, which, like the internal advertising, amount to a colossal negative sum game for the system as a whole.

We are aware that getting defined benefit pensions obligations off University books will probably enable more money to be borrowed for such purposes, which is widely understood to be part of the motive for UUK’s uncompromising and non-negotiating stance. Regarding that stance, your letter goes to great lengths to depict UCU as intransigent, whilst anyone following the negotiations will know that UUK have consistently refused to engage with any proposal but their own. We think you owe staff an explanation, for example, of why despite repeated requests, UUK refused to specify which combination of changes they would be prepared to accept in order to preserve the guaranteed pension.

Your letter also does not address the likelihood that the UK will not be able to continue recruiting and retaining high quality academic staff with a third rate pension scheme, given the time out of pensions contributions that academics spend getting their higher degrees, conjoined with the now transparent injustice of very high levels of remuneration accruing to senior management. This comes alongside wider erosions of conditions of work and the political uncertainty surrounding Brexit. Instead of using such a crisis climate to dispense with defined pensions obligations, a responsible approach would be to temper any decline in attractiveness of UK HE by committing to maintain defined benefits pensions.

Finally, we urge you to reconsider UUK’s uncritical acceptance of the one size fits all approach to pensions fund evaluation, and also to endorse a consistent approach to evaluation, across UCU, USS and UUK proposals. If so, we believe you could make an enormous difference to the outcome of this dispute, thanks to your influential position as Vice President of UUK and contacts in Whitehall. Such influence should be used to the benefit of academic staff and students, and the UK University system as a whole, not to further an agenda of privatisation and associated offloading of responsibilities.

Yours sincerely

RUCU committee.

USS Meeting with Sally Hunt 8th February 14:00

USS Factsheet

Letter from Reading UCU to Sir David Bell 26 Jan 18

Reading UCU in the Top 10!

Loughborough VC supports UCU re USS

The Loughborough VC has written his support of retaining a USS Defined Benefits Scheme in a letter to UUK. Please click on the image to enlarge. The full PDF link is also available here:

http://ucu.lboro.ac.uk/wp-content/uploads/2018/01/20180112121326.pdf

Latest USS news – and hot off the press!

Dear all,
 
The USS Joint Negotiating Committee meeting is continuing today after a full day of discussions yesterday.  Please spare a moment to think of those who represent UCU and who are negotiating hard on your behalf.  News will come out as soon as there is any. AND HOT OFF THE PRESS: negotiations will continue now till 23 January – the team can claim some success!!!  This means that a decision will not be taken by UUK until after the result of the strike ballot – and it may well be our threat of sustained strike action which has made them pause for thought, so this makes it ESSENTIAL that we get as many votes as is possible on the ballot. HAVE YOU VOTED??
 
As we move towards the Christmas break, and desks are tidied, clutter is decluttered and there is room for sustained concentration, please make sure that you have a) received your ballot paper, b) filled it in and c) posted it.  If you have not received your ballot paper, please go to  https://www.ucu.org.uk/ussballotrequest where you will need to quote your name, email address and branch, and will be able to give an address that will work for you over the University closure period. This form goes to UCU Head office who will then send a file of details to Electoral Reform Services who will send out the replacement ballot paper.  The link shows a photo of what the envelope will look like – please bear in mind that if you are asking to have the paper resent to an address outside the UK, there may be legal implications for receipt of union papers and we’d strongly advise checking the laws of the country you’ll be in.
 
There is plenty to read out there on the subject of the USS dispute.  Most of you will, I’m sure, have seen John Brady’s message to all staff on the university staff homepage (http://www.reading.ac.uk/internal/staffportal/news/articles/spsn-751419.aspx).  UUK also issued a statement which is similar in tone.  We could happily spend time pulling John Brady’s statement apart, but Sheffield’s branch of UCU have done a far wittier takedown of the UUK statement, which can be found at http://ucu.group.shef.ac.uk/wp-content/uploads/uss_pensions_5_opinions.pdf. Enjoy!
 
Other things to read: the employers have now prepared modelling of what pensions would look like following the proposed changes.  The link is here –http://www.employerspensionsforum.co.uk/sites/default/files/uploads/aon-hewitt-modelling-proposed-uss-benefit-changes.pdf.  Page 3 is the good one, but do read through carefully.  You’ll see that in every single example, the projected annual pension income, for any group, issignificantly less than it would be on the current basis.  And remember that this is the document commissioned by UUK, in support of their argument.   Worse still for their argument, the base calculations that they’ve used are not the same ones as have been used by USS to model the pensions going forward for the benefit of the pensions regulator – they’re better figures.   In other words, UUK insisted on sticking to a valuation of the pension scheme which they’ve claimed makes it unworkable: but they have then used different figures to predict what your pension would be if they managed to force through their changes – and the final outcome is still startlingly bad….  Mike Otsuka of LSE has put up a new blog post which analyses the analysis – https://medium.com/@mikeotsuka/uuks-actuary-s-best-estimates-eliminate-the-uss-deficit-33dad2afc24b and his conclusion is that if the (better) figures used by Aon in the analysis above were to be applied to the overarching fund, then we would all be very happy.
 
The modelling that UCU had done is at https://www.ucu.org.uk/media/8916/TPS–USS-no-DB-comparison-First-Actuarial-29-Nov-17/pdf/firstacturial_ussvtps_nodb_29nov17.pdf but the thrust of that was to compare USS pensions to the TPS pensions for the post-92 universities.
 
Sally
Sally Pellow
 
Secretary
Reading UCU

Q&As re USS, answered by UCU National Pensions Official

  1. What effects would the proposed changes to the USS pension have for early career academics?

Early career staff will be the most affected by the changes as they have less built up in the current scheme. They are also more likely to be on less secure contracts. Whatever anyone has built up in the current scheme up to April 2019 will be protected however, going forward under the current UUK proposals they will have no further benefits built up in defined benefit (annual pension linked to salary and service) but will be built up in defined contribution (what you pay is defined but outcome dependent on stock market) which will be a cash sum from which you would have to drawdown until it ran out or buy an annuity (pension) which is very expensive.

2. How do the proposed changes compare to what is happening to pension systems in the private sector, where investment funds are a common pension vehicle even for third sector employers?

Very like private sector pensions in that the build up is in defined contribution but the death in service and ill health will continue to be defined benefit.

3. Do we know in what kinds of investments our pensions will be held in, if the changes go ahead, and do employees have any control over these investments?

Thousands of members already build up a defined contribution pot in USS either as an extra and by taking the ‘match’ as a way of getting an extra one percent from employers or if they earn over £55,500 and all salary over that is pensioned as defined contribution. Currently there are 6 choices for members 2 lifestyles (one ethical) and one other ethical but this would expand.

4. I was wondering if it were possible for USS members to have their contributions paid into TPS. If not now, in the future?

This is an idea we would be happy to explore but it’s not under discussion at the moment.

5. Has the Union produced detailed data of the potential impact on members at different stages of their career i.e. 25, 35, mid-career and say two to three years before intended retiring date?

The First Actuarial report shows the impact on 12 hypothetical members at different career stages:

http://www.ucu.org.uk/media/8916/TPS–USS-no-DB-comparison-First-Actuarial-29-Nov-17/pdf/firstacturial_ussvtps_nodb_29nov17.pdf?utm_source=lyr-ucu-members&utm_medium=email&utm_campaign=members&utm_term=uss-all&utm_content=Your+pension+under+attack

 

Short version:

https://www.ucu.org.uk/article/9093/Overhaul-of-university-pensions-could-leave-staff-200000-worse-off-in-retirement?list=1676&utm_source=lyr-ucu-members&utm_medium=email&utm_campaign=members&utm_term=uss-all&utm_content=Your+pension+under+attack

 

  1. What alternatives are UCU proposing?

Under discussion but will be governed by conference policy

 

  1. In the event that we do go over to a defined contribution pension, why should the university contribution be 18% to our 9%? (8%, it is only 9% with the match which will go)

That amount was based on what was needed to support our defined benefit pensions under the USS. (The employers envelope is 18% (until 2020) out of that is deficit recovery, charges, admin, money to keep the defined benefit paying out assuming the employee contributions are not going in; anything left will go into the individual DC pot and all the employee 8% will go into their individual DC pot. The individual will probably get an option to pay less in, which may be attractive to those who feel 8% is too high.

In 2011 the employers only wanted to pay 10% into a DC pot, the current offer is slightly more but the closed defined benefit section will eat money.)

Now that the money would no longer go to that, the amount they provide needs to be enough for us to have a sensible pension given expected returns. If this is above 27%, then they need to contribute more. Can such a calculation be done to determine what they would need to provide to be used in negotiations?

They don’t think they need to give you enough for a sensible pension they say they won’t contribute more, not can’t, won’t.

 

  1. In the event that we do go over to a defined contribution pension, can we get a non-negotiable guarantee that the universities will indefinitely contribute 18% (or whatever the final amount is) of our salaries into a defined contribution pension? I am concerned since currently the universities pay 18% to our 9% since that it what the USS needed to pay our pension. If the universities are no longer liable to support our pension, what is stopping them from slowly reducing their contribution to our pension?

They only ever promised 18% to 2020 and signaling they will reduce but as the Defined Benefit has no member contributions going in it will be very expensive.

 

  1. In the event that we do go over to a defined contribution pension, what fraction of the contribution will go towards supporting the defined benefit pensions? If this is any number above 0, why should we be responsible for supporting other people’s benefits? (Anyone in now will have benefits building up until 2019 not just other peoples.)

How can we be guaranteed that none of our money is used to support a defined benefit pension? Your money will go into your pot you can see it on the Investment Builder login.  Yes the employer will have to pay a lot to keep the DB section, they have a legal duty to pay out pensions already built up.

 

  1. In the event that we do go over to a defined contribution pension, why should USS be the one to manage it? For whatever reasons, they have shown that they are unable to manage our pensions effectively. I don’t see why we can’t get another company to do it.

Good point one that has been made. However, because it’s so big it can buy investments cheaply and the employer will pay member charges for most options and admin. It is up to the employer not a member what scheme is on offer in a workplace. An employer will only pay in to the one scheme per group of employees so it’s that scheme or no scheme.

 

  1. In the event that we do go over to a defined contribution pension, what happens to our matching 1%? Will this carry on or be removed?

Whatever happens the match will be removed probably around April 2019. Make the most of it.

 

  1. What kind of pensions are the leaders of the UUK on?

UUK and USS staff like UCU staff are all in USS. The Vice Chancellors and such are usually earning too much to pay into a pension there is only so much you can pay in for a lifetime if not they are in USS.

 

  1. What happens if all junior members of the USS simply pull out?

They would love it. It would save employer contributions and not have to provide an alternative, if it is DC it can run as well with 3 people its all about individual pots.

 

  1. If the future accrual of the defined benefit portion of our pensions is set to zero, what does it mean to keep the death and incapability benefit? Do our partners or dependents somehow get our defined benefit pension if we die young? If so, how is that pension calculated?

In the current UUK proposals Death in Service and Incapacity will remain defined benefit in most DC schemes there would be a lump sum. How this would be calculated is yet to be discussed.

 

  1. In the news, I keep hearing that the issue with the USS all comes down to how future risk is assessed and that since universities are long standing institutions, there is no problem in the long run (e.g. https://www.timeshighereducation.com/blog/uss-pension-changes-would-be-disaster-universities-they-are-preventable). Are the universities being unreasonable about this and if so, how can this be remedied? Can we use a 3rd party to give a fair assessment of the risk to be used in negotiations?

We have tried and taken our Actuaries, First Actuarial into meetings. No success.

 

  1. How do the changes affect those who are already drawing a pension?

No change

 

  1. How do the changes affect those who are on a flexible contract and drawing a fraction of their pension from USS?

No change on pension and same impact on pension building up as other members.

 

  1. Re the new pensions scheme, does this work like the Premium Bond system where one gets the capital (i.e. amount invested back) and then any gains on top on date of retirement or is the whole amount at risk and what you get back depends on how the market is doing on the day one retires?

The whole amount is at risk.

 

USS Pension Talk 12.12.17 13:00 Edith Morley G25. All staff welcome.

Past strike pay deductions, USS and Pensions Action Group

Yesterday’s OGM was well attended, with over 10% of members attending. We covered two main points:

Past strike pay deductions: UUK (Universities UK) advised all universities, a few years ago, that those who declare strike action should have pay deducted at the rate of 1/260th of annual salary. At the time, Paul Hatcher discussed this with John Brady and emphasised that this was incorrect, but we weren’t able to pursue this further owing to cost. However, a test case elsewhere, involving teachers, has worked its way through to the Supreme Court which has confirmed that pay should be deducted at 1/365th of salary (https://www.supremecourt.uk/cases/docs/uksc-2015-0142-judgment.pdf, if you want to see the judgement, and https://www.cipp.org.uk/news-publications/news/calculating-strike-pay.html for a concise summary). UCU Head Office has written to all Vice Chancellors to ask that the incorrectly deducted pay be refunded to those who had been penalised in this way. John Brady met again with Paul and proposed that in return for agreeing that deductions would be at 1/365th from now on, we would waive any such claim for the past. This proposal was put to the members at the OGM yesterday and was defeated. Our counter proposal, to pursue the repayments due, was overwhelmingly passed. UCU centrally are spearheading the action on this and are likely to start off with a couple of test cases at a couple of universities, which in turn will force the more recalcitrant universities into responding, so we don’t expect anything will happen quickly for anyone here (sorry, no extra Christmas bonus… but next year…) If you think you were affected by this, please let us know as we will start to build a list of those who have missed out.

Local rules: Following the AGM in the summer, UCU rejected the local rules which had been proposed at the time: the key issue was the extent to which the local rules can be permitted to override national rules. Clarification was sought, and revised local rules were proposed, as circulated to members on 21 November. A motion was raised to accept the revised local rules and the motion was passed. These will now be posted to our website.

USS: The bulk of the meeting, not surprisingly, was devoted to USS. Paul summarised what had happened to date: USS had been through a valuation which indicated that the employers would need to add further investments to the fund. This was based on a valuation which UCU consider to be unduly pessimistic: but UUK sided with the valuation. To clarify: if you think of USS as a current account and a savings account, the current account receives the payments in each month, and pays out to pension holders. There is more money coming in than there is going out. In addition, on the savings account side, there are investments to the tune of £60 BILLION. However, pensions regulators are pessimistic beings, and at the end of October, the Pensions Regulator (fuelled by government policy) said, gloomily, that there still wasn’t enough money in USS to meet all commitments present and future IF ALL the universities were to go bust. We can’t help feeling that if all the universities go bust at once then we may have bigger problems to worry about… However, UUK seized on this pessimistic approach and have taken the opportunity to propose closure of the current scheme, which is a defined benefit (DB) scheme, and to switch to a defined contributions (DC) scheme. (See https://www.gov.uk/pension-types for a simple explanation of the variations). It is generally accepted that a DC scheme is not as good a pension as a DB scheme.

However, this is not the only bit of bad news. UUK have also stated that they would pay 12% of salaries into the proposed DC scheme. They currently pay 18% of your salary into the DB scheme. So they are – putting it simply – giving us all a pay cut. They will still pay the remaining 6% into a closed scheme for dealing with incapacity and death in service payments, but this would no longer be part of YOUR pension, but simply going to a general pot. So, at the moment, 18% of your salary is deferred for your retirement – and this will drop to 12%. For those nearing retirement, this will make less of an impact than for those starting their careers – who are often on poor salaries, temporary or fixed term or variable hours contracts.

It will surprise few people to hear that these proposals, as far as we can establish, have not been costed by UUK.

UCU is refusing to start negotiations on this. In negotiations, you have to start with a negotiating position which means you’re open to part of the argument. We do not accept this suggestion of closure of USS and a move to a defined contributions scheme. This leaves us only the option of strike action, with the aim of disrupting the universities – denying them our service. Ballot papers are on their way – look for them, and please vote.

Information that is of interest – the Vice Chancellor of Warwick came out against these proposals (http://blogs.warwick.ac.uk/execteam/entry/which_way_forward/) and so did the VC of Glasgow (https://www.gla.ac.uk/myglasgow/news/headline_561539_en.html) .

Pensions Action Group.
We are now launching a Get the Vote Out (GTVO) campaign and are creating a Pensions Action Group (PAG) to help with this. CAN YOU HELP? We need to make sure that EVERY member has received their ballot paper, and that they have voted (regardless of what that vote might be, we need people to vote!). Please let me or Colette know if you are able to help – we are trying to find someone in every building, who can put up posters; and someone in every working team who can pass the word and encourage people to vote.
The first PAG meeting will be on Monday 4 December from 1.00 till 2.00 in Chancellor G04.

Even if you aren’t able to help with the Pensions Action group, please take ten minutes to tell non-members in USS about what is going on, and to explain the threat to their pensions. Feel free to pass on this email or others. Encourage people to join us. It’s worth mentioning that USS is only applied to Grade 6 and above, in tandem with UCU’s membership base for collective bargaining – but those who are Grade 5 and below are still welcome to join if wished, and would be eligible for individual support.

Sally Pellow, Branch Secretary