February, 2018:

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.