This is a piece largely written as a rebuttal to Waseem Yaqoob’s recent article on the LRB blog, entitled Why We Strike. Let me start by clearly stating that I support the University and College Union’s (UCU’s) right to strike from Thursday, and think it is ludicrous that 7 of the 68 ‘pre-92’ universities’ UCU groups need to reballot their members before they are allowed to carry out what is clearly the majority view of their members. I just think they are wrong this time.
The Joint Negotiating Committee (JNC – apologies there are lots of acronyms in this) of the Universities Superannuation Scheme (USS) is the body tasked with negotiating the pension deal struck every 3 years. It has equal numbers of members from Universities UK (UUK – representing the employers (over 390 of them)) and the UCU, with an independent chair who gets to cast the deciding vote on matters when the other JNC members are in deadlock. Just such a deadlock occurred over the future of the USS. The UCU representatives wanted to continue with some sort of defined benefit (DB) arrangement, where benefits are guaranteed, and the UUK representatives wanted to switch to defined contribution (DC), where contributions are instead paid into an invested fund for the member to secure benefits with as best they can at retirement. The chair went with the UUK position.
As a member of the USS as a result of working as a lecturer at the University of Leicester, I fervently hoped for a different outcome for purely selfish reasons. However I could not justify why I should have a DB pension (which I agree is a vastly superior option to the DC alternative being offered) when the vast majority of DB schemes are already closed, including let’s not forget the University of Leicester Pension and Assurance Scheme, which has been closed to new entrants since 2003 and to future accrual since 31 March 2016. Is it realistic or reasonable to assume that Grades 6 and above will continue to enjoy DB accrual indefinitely while Grades 5 and below don’t?
You will hear a lot about how something which is personally disadvantageous to one lecturer after another is therefore suddenly going to damage higher education irrevocably, depicting academic life as so uniquely risky that only the safety blanket of a DB pension will persuade people to do it. This is despite them not being seen as necessary in many other top global universities. For
example, the top universities in the United States mainly have DC pension schemes.
The rationale for the changes is not dubious. The vast majority of DB pension schemes follow the same funding approach as the one used by the USS which has revealed such large deficits, as was recently confirmed by research carried out by Punter Southall. Most research points to a gilts plus basis being the most appropriate for a scheme still open to future accrual.
Neither do I agree that the funding approach proposed is unduly prudent. The Government has produced a green paper, which was largely based on the report from the Commons Select Committee for Work and Pensions in December 2016, which was itself in response to what happened at Tata Steel and BHS in particular. The Select Committee report suggested legislation was needed to:
- Agree changes to the indexation of pension benefits in instances where such changes are needed to make a scheme sustainable
- Allow scheme members greater flexibility to take their pension as lump sums
- Make recovery plans of more than 10 years exceptional (the USS currently have a recovery plan of 17 years, 14 of which are still outstanding – reducing this to 10 would considerably increase the contributions required into the scheme).
It did not focus on valuation methods particularly.
However the resultant green paper, which launched a consultation which ended in February 2017, considered 6 questions, the first of which was focused on whether current valuation measures were the right ones. Unfortunately the detailed discussion (eg in paragraph 213) was hardly encouraging to the view that the USS funding basis is too prudent and the contribution requirements too high, as it suggested that stricter interim funding targets be set for schemes which were severely underfunded and gave an example of what they meant by this as being less than 100% funded on the Pension Protection Fund (PPF) basis (this is the pensions lifeboat for schemes with insolvent employers – USS was 82% funded on the PPF basis at the last valuation).
One point where I am in agreement with Yaqoob is that the success of the strike will depend to a large extent on how students respond. I was amused by the admission that “Students have expressed solidarity with striking staff while at the same time demanding refunds for their disrupted education”. I believe that the solidarity with striking staff is due to misinformation, whereas the demand from students for refunds for their disrupted education are likely to be more long-lasting.
I have resigned my membership of the UCU as a result of this ill-conceived strike action. I urge other members who feel a similar discomfort about what they are being asked to do to consider whether they need to do the same.