Hundreds of thousands of members of the £72bn Universities Superannuation Scheme face the threat of a further rise in their pension contributions after the plan’s managers revealed a funding hole had nearly doubled to £6.6bn.
About 198,000 active members of the USS, the UK’s largest private sector pension plan, are making monthly payments of 8.8 per cent of their salary towards their pensions, which promise an inflation-proofed retirement income for life.
These payments are due to rise to 9.6 per cent of salary from October, under a controversial schedule put forward by the USS, and backed by university employers, to address a £3.6bn deficit in the scheme’s finances based on a valuation in March last year.
The possibility of a further increase is likely to inflame a pension dispute dating back to 2017, which last year resulted in the biggest wave of industrial action on UK university campuses in decades.
The pension fund is consulting with employers over the October increase, which is opposed by University and College Union that represents tens of thousands of members of the USS scheme.
As part of that process Bill Galvin, the group chief executive of the USS, this week flagged that members could face a further imminent increase in their contributions, as he revealed the scheme’s deficit had widened to an estimated £6.6bn at the end of July, citing “recent volatility in financial markets”.
In a letter to Alistair Jarvis, chief executive of Universities UK, the body representing more than 350 higher education employers, Mr Galvin warned there was “a real risk” that the trustees of the scheme would “need to reconsider the contribution rates/or evaluate other mitigating actions that may be required” before concluding the 2018 valuation.
The USS declined to rule out further increases to contributions in the event of subsequent review of the 2018 valuation scheme.
“Before finalising the valuation, the trustee is required to consider whether the long term assumptions that were made at that date remain appropriately prudent,” the USS told the FT. “The global economy and financial markets are clearly quite different from where they were on March 31 2018 — the date of the valuation.”
The fresh disclosure that the pension deficit has widened again comes as the university sector faces a renewed threat of industrial action over the plans to raise contributions to 9.6 per cent. The UCU is preparing to ballot members in September.
Paul Bridge, head of higher education at UCU, said there was no need for any further increases in contribution arguing that scheme’s valuation methodology was “no longer fit for purpose,” adding: “USS is a viable scheme which remains in a strong position.”