The Open University (OU) is one of more than 340 higher education and related institutions across the United Kingdom that participate in the Universities Superannuation Scheme (USS). With effect from Thursday 20 February the University and College Union (UCU) has announced it is taking 14 days of strike action, spread over four weeks. This is around two separate disputes, one regarding increases in pension contributions that staff are now paying, an increase of 1.6% of salary since April 2019, and a second on pay and working conditions. This is a national strike and is affecting the OU as well as over 70 other institutions across the UK.
Pension dispute explained
In regard to the pension dispute, the latest valuation of the scheme, conducted by the independent trustee board of USS which has legal responsibility for this process, shows a significant deficit and that the cost of maintaining future benefits has increased substantially. It is understandable that any contribution increases are unwelcome, but given the financial position of USS, changes to contributions are necessary in order to continue to provide staff with a long term viable and financially secure pension scheme. There will be no changes to the benefits staff receive as part of their USS pension. The University’s contribution rate to staff pensions has increased by 3.1% of salary since April 2019.
The issues are complex, but the University’s position is clear. The scheme must remain affordable and sustainable, and recognise the trustee board’s responsibility to ensure that members’ interests are protected. In December 2019, the Joint Expert Panel (JEP) published a second report, jointly commissioned by UCU and Universities UK (UUK). The report made a series of interlocking recommendations covering the governance of valuation-related aspects of the pension scheme, the valuation methodology itself, and the way the interested parties engage on the development of the scheme going forward. The report is now being considered in ongoing tripartite talks between USS, UUK and UCU which are scheduled to continue until at least March 2020.
Pension contributions and the 2019/20 pay award
UCU is asking employers to reduce member contributions to 8.0% of salary (which is what they were prior to April 2019). This would mean employers absorbing the additional 1.6% of salary contribution that staff are currently paying, on top of the extra 3.1% that employers are already contributing (the employer rate has increased from 18% of salary to 21.1% since April 2019). Unfortunately, this is neither consistent with the Scheme’s cost-sharing rule for contributions, nor would it be sustainable for employers. As a financially responsible institution we need to be clear that an employer contribution higher than the current 21.1% of salary – for example of 22.7% should UCU’s demands be agreed – would put significant additional burden on the OU’s financial position and further increase the existing pressure on our services and our staffing levels which, ultimately, would impact on our students.
For the 2019/20 academic year colleagues working across the higher education sector received a minimum 1.8% pay award, with colleagues on the lower spine points receiving up to a 3.65% increase. For the OU this translated to a c.£5.6m investment in staff. Over the last three years staff across the higher education sector have received a total pay award of at least 5.5%, with eligible colleagues also receiving an annual increment. When considering whether the nationally negotiated pay award is reasonable, we must balance our desire to offer a pay settlement that recognises the high value we place on our staff but is also mindful of the responsibility all institutions have towards their financial obligations, our staff and our students.
Industrial action is always regrettable, and it is unfortunate that the most recent talks have not yet resolved this dispute. However, our priority during this action is to minimise the impact on our students as far as possible, and we are confident that the majority of OU staff will be working as normal during this period. At a national level, we sincerely hope that negotiations can continue between our representative bodies, the USS trustee and UCU, and come to a resolution.
In support of this statement we have produced some FAQs which provide more detail around some of the more complex elements of the current issues with USS pensions.
In response to this industrial action, UCEA and Universities UK have also published an open letter to staff.