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USS valuation: JNC decision to progress UUK proposal

The USS Joint Negotiating Committee (JNC) decided on 31 August 2021 to progress the proposal put forward by UUK for reform of USS benefits, writes Rebecca Dodd of Mercer’s Higher Education Group.

JNC decide to progress UUK proposals

• By casting vote of the Chair, Judith Fish, the JNC voted to propose the reforms put forward by UUK
• The benefit reforms and covenant enhancing measures would mean total contributions of 31.2%
• There will need to be a 60 day “employer led” consultation with members (expected Autumn)
• Changes would be from 1 April 2022

The October 2021 increases

• USS have agreed that the October 2021 contribution rates (11% members and 23.7% employers) can be replaced with the reformed rates (9.8% members and 21.4% employers) subject to a two week consultation with UUK
• USS have proposed a "dual-rate schedule of contributions" with backstop total contributions of 34.7% from April 2022 rising every 6 months up to 57% from October 2025 should the benefit reforms not happen

UCU proposal

• UCU is discussing industrial action
• UCU have announced an alternative proposal on their website but it wasn’t formally proposed to JNC
• The proposal is similar to the UUK proposal in terms of a reduced salary threshold of £40,000 but with accrual of 80ths and member contributions of 8.1% (employer contributions of 24.9%)
• UUK have advised employers to ask their UCU branch to ask UCU HQ to table any alternative formal proposal

What can you do?

Here are some things you might want to consider:

• Council/Board/Exec Team guidance
• Presentation to members pre-consultation explaining the current situation and what it all means
• Presentations to members once the consultation has started explaining the proposals, the support materials available and how they can feedback into the consultation

A reminder of the UUK proposals

Proposed benefits

• Accrual rate of 1/85ths (with 3 x lump sum)
• Salary threshold of £40,000 (DC contributions stay at 20% in total above the threshold)
• Indexation capped at 2.5% p.a. (for benefits before and after retirement)

Covenant support measures

• Debt monitoring with triggers for possible remedial action
• Pari passu means equal security for USS on new secured debt with a threshold of 10% of assets
  Note: triggers and pari passu excludes those on “limited participation terms” like many post 92 universities
• Rule change on employer exits with a 20 year rolling moratorium (no transition gap)

Contribution rates (costed by USS)

• 31.2% total contributions (currently 30.7%)
• 9.8% for members (currently 9.6%)
• 21.4% for employers (currently 21.1%)

Flexibility and lower cost pension options

• UUK continuing discussions with UCU and USS
• UUK hope to include the options as part of the consultation

Rebecca Dodd
Head of Mercer’s Higher Education Group
rebecca.dodd@mercer.com
0113 394 7675