The Open University is one of more than 350 Higher Education and related institutions across the United Kingdom that participate in the Universities Superannuation Scheme (USS). It is also one of over 60 institutions facing industrial action regarding proposed changes to USS.
The latest valuation of the scheme, conducted by the independent trustees of USS, confirms that there is a significant deficit and that the cost of maintaining future defined benefits has increased substantially from previous projections. The issues are complex, but the University’s position is clear. Some changes to benefits need to be made to ensure not only that the scheme remains affordable and sustainable in the long term, but also that the benefits already built up by members remain securely funded.
The University also needs to understand the level of pension risk to which is it exposed in USS. As a financially responsible institution, it needs to be clear on the level of future contributions it makes on behalf of staff to the USS. We have told Universities UK (UUK) that we believe an 18% employer contribution is fair but that it is also at the limit of affordability, especially given the current challenges facing the OU. Any contributions in excess of 18% would put significant additional pressures on the the University’s financial position and further increase the existing pressure on our services and our staffing levels, which ultimately affects the value for money we are able to provide our students.
It is understandable that the proposals are contentious. We recognise that they would mean a change in benefits for staff, with the proposed new scheme being regarded as less generous than the current scheme. By law there can be no changes to the benefits which members have already built up, so the proposals are about changes to future benefits. The status quo is not an option and changes must be enacted in order to continue to provide staff with a pension scheme with a good and attractive range of benefits. The proposals decided on by the Joint Negotiating Committee in January 2018 would still provide all scheme members with an employer contribution of almost double the private sector average to future benefits from the USS Investment Builder (the defined contribution section of USS). Employer contributions would continue to meet commitments to the past service deficit (this contribution to support the funding and security of past service rights is hugely important), and to the provision of benefits in circumstances of death and incapacity on a continuing defined benefit basis.
Strike action is always regrettable. The University would like to see the dispute resolved through national negotiations. We are therefore pleased that discussions between UUK and UCU (University and College Union) continue and the University supports UUK’s statement that employers would want to consider any credible, affordable solutions that could be brought forward. We also support the proposal from UUK to engage in further talks with UCU on the longer-term future of the scheme, including the framework for a possible return to defined benefit-type provision.
Our priority continues to be protecting and ensuring the success and sustainability of The Open University and of its students and staff. We believe the proposed changes provide a pragmatic and realistic response to the funding challenges and help to protect our financial security. But these are proposals, and there continues to be opportunity for further negotiation over the coming weeks.
In support of this statement we have produced a number of FAQs, which provide much more detail around some of the complexities of the pension issues.
We also advise that for people wanting more information they refer to the following UUK documents: