by Ed Randall, Pensions Rep
The Joint Review Group (JRG), under the chairmanship of its independent chair Sir Andrew Cubie, met eleven times in 2009 and has a timetable which means that it should announce the results of its deliberations in April. Assuming agreement is achieved in line with the timetable for completion of the JRG’s work formal consultation on any changes with members of the scheme – which is a requirement – should take place over the summer; implementation of any changes is supposed to begin this autumn. I know that UCU negotiators would like, quite separately from formal consultation on any USS changes, which I think is managed through employing institutions – to present what comes out of the Joint Review Group to UCU USS members for their consideration as soon as possible after the JRG completes its work. That could be a very demanding task!
I think it is important to point out that at the beginning of the Joint Review Group’s work it was agreed with Andrew Cubie – who apart from being the independent chair of the JRG has a casting vote on its recommendations in the event of disagreement – that the JRG’s deliberations would be kept confidential until JRG proposals for any changes were finalised. I know that our UCU representatives on the JRG are committed to a process that allows for a full and frank exchange of views, which is not derailed by leaks.
At yesterday’s meeting I was able to ask some questions. I explained that my main concern was the limited time that is likely to be available to communicate any changes agreed/proposed to the USS rules to our members. There is likely to be a flood of information, information that will be hard to digest, in a few weeks time. I think I have a reasonable grasp of the issues and I would be willing to help with communication of proposals at Goldsmiths if the Executive thinks that would be useful/helpful.
There is some general background which may be helpful.
The possible need for changes to USS reflects risks to and pressures on the scheme which are undeniable.
a) Increased life expectancy of members. USS members are not only living longer on average in retirement but are expected to live longer still (on average). This has increased costs and must be assumed likely to increase costs in future.
b) Salary increases. Because USS is a final salary scheme increases in pay, specifically pay at the end of a USS member’s career, can have a big impact on pension costs to USS. In recent years pay increases have added to the likely long run cost of pensions for existing members when they reach retirement. Some take the view that changes in pay over the last few years have been exceptional (implementation of H.E.R.A/Pay Framework and better than average pay increases) and are unlikely to be repeated; others do not.
c) Poorer investment returns/unexpectedly sharp reductions in the value of USS investments. Only a fool would claim to be able to predict with a high degree of confidence how equity values will change over the next ten or twenty years, but concerns about the prospects for equity and other investments in the years ahead, particularly in the wake of the credit crunch, focus attention on the adequacy of member and employer contribution rates and the affordability of scheme benefits in future years.
As Sir Andrew Cubie explained at the end of 2009 employers and members need to consider – amongst other things – such issues as:
i) Arrangements for flexible retirement;
ii) cost-sharing between stakeholders in USS.
I know that our JRG representatives have had to wade through a vast amount of information from actuaries and modellers and consider things like accrual rates and the merits and demerits of changes to the current scheme that replace final salary with career average earnings as the basis for calculating a USS pension. I believe, based on what I have heard from them , that our representatives are capable of seeing the wood for the trees and that they are working very hard to ensure that USS remains one of the best occupational pension schemes in the country.