National pay negotiations and USS pension review
Please find below two briefing documents based on information provided by i) the Universities and Colleges Employers Association (UCEA) on the 2010-11 national pay negotiations and ii) the Employers Pensions Forum for Higher Education (EFP) for members of USS on pension review.
i) UCEA briefing on pay negotiations 2010-11
The agreed dates for negotiations through the formal New JNCHES (Joint Negotiation Committee for Higher Education Staff) were: 29 March 2010, 19 April 2010 and 5 May 2010. A further meeting has now been scheduled for 28 May 2010. The trade unions’ (EIS, GMB, UCU, Unison and Unite) joint claim presented at the first meeting included a 4% pay rise plus a number of additional elements, pay-related and otherwise. Employers estimate that the 4% rise alone would cost the sector in excess of £500m.
The employers have emphasised the need for the unions to re-examine the details, costings and impacts of their claim. The employers’ approach is set against an exceptionally difficult economic climate with institutions facing serious financial challenges and uncertainties relating to income. Against the background of cuts in sector funding (£900 million in England alone), the employers invited the trade unions to consider how a non-consolidated pay increase (of a quarter of one percent) might be applied. This offer was subsequently raised to 0.4% at the 5 May meeting.
Current joint working
As part of last year’s agreement, employers and unions are currently considering a range of issues (many of which were raised by unions) through three joint working groups covering:
• work to take forward a range of equalities issues, including looking at the systemic issues behind the gender pay gap.
• work to further evaluate pay modernisation through implementation of the Framework Agreement and to improve the collection of sector pay data.
• work to increase understanding in relation to HE funding and sustainability issues affecting financial decision-making.
These groups have started meeting to tackle these important sector matters, with work programmes running to December 2010.
Job security issues and the Acas Digest on Job security
UCEA has acknowledged the trade unions’ concerns about job security issues. In relation to this, the employers reiterated that the Digest on job security, developed with the unions through Acas during the 2009 pay negotiations, was very recently distributed in March 2010. The Acas digest is intended for reference purposes, encouraging dialogue and a shared understanding of important issues facing institutions considering staffing changes.
Throughout last year’s negotiations, and again this year, UCEA explained that the unions’ request for a national position on job security is an impossible task for a national membership body. Recent consultations with UCEA members have again given the clear response from HEIs – that this matter is outside of UCEA’s remit and that decisions on staffing can only be taken at institution level.
Pressure on staff costs from pensions and increments
The pay settlement for 2009-10 of 0.5% followed several years of very significant pay increases for HE staff. The current pay offer is a 0.4% non-consolidated increase, for many institutions at the limit of affordability and is set against big increases in staff costs from other factors. Increases in pension costs (for example the largely unreported 2% rise in USS contributions in October 2009) has meant that the overall increase to staff costs in HEIs will have significantly exceeded the headline pay award of last year. Add to this the impact of incremental pay growth for about two thirds of staff across all HEIs and the increases in staff costs spiral further. Despite the economic pressures, employers have to find the funds to continue to pay incremental payments to a significant number of staff; these pay increases average 2.9%.
Employers want to retain high quality pension schemes and prevent problems that would threaten the long-term future of the schemes. That is why change to a scheme such as USS is a necessity, not an option. Please use the following websites for additional information relating to the USS or pension issues in HE:
http://www.uss.co.uk/HowUssIsRun/Schemereview/Pages/default.aspx]
http://www.employerspensionsforum.co.uk/en/index.cfm
Key messages
UCEA’s 3 key messages in relation to the national pay offer for 2010-11.
• The unions’ 4% pay claim cannot be afforded in the economic environment and would cost the sector in excess of £500m. The sector is already experiencing the impact of funding cuts so the true challenge for institutions is sustainability; the employers’ modest offer must be considered in this context.
• Job security issues are a serious concern for all but decisions on staffing can only be taken at the individual institutions. The Digest on job security, developed through Acas during the 2009 pay negotiations, was distributed in March 2010. The Acas Digest is intended for reference purposes, encouraging dialogue and shared understanding of important issues facing institutions considering staffing changes.
• Pensions and increments costs mean that the overall increase to staff costs in HEIs will have significantly exceeded the headline pay awards. This current offer has to take into account the fact that a significant number of staff will receive incremental pay rises averaging 2.9%.
Background information: UCEA’s website provides extensive background information relating to the 2010-11 Pay Negotiations http://www.ucea.ac.uk/en/2010_Pay_Negotiations/
ii) EPF update on pension review for members of USS
Members of the Universities Superannuation Scheme (USS) will have received a statement from USS in January this year explaining that the pension scheme has been under review.
The review has been taking place at a time when pension provision in the UK is changing rapidly in response to cost pressures and enhanced longevity. It is the latter that primarily accounts for the need for change.
USS was set up in 1974 and has been operating successfully, and largely unchanged, since then. However, it is subject to the same cost pressures as other private sector schemes, and changes are now needed to ensure that it remains sustainable, attractive and affordable.
In light of this, a Joint Review Group (JRG) was set up in late 2008 comprising representatives from the Employers Pensions Forum (EPF) representing HE employers and the University and College Union (UCU) representing USS scheme members regardless of union membership, under an independent Chair, Sir Andrew Cubie. Its aim has been to determine what changes should be made to USS to ensure that the scheme remains sustainable, and an integral part of the remuneration package.
The parties to JRG together agreed some principles and a timetable which specified that a decision on changes to USS would be reached by the end of April 2010. The JRG’s recommendations were then put to the USS Joint Negotiating Committee (JNC), which, with the USS Trustees, is charged with taking any final decision on changes to the scheme.
The JRG held its final negotiations meeting on Friday 30 April and was unable to come to an agreement on the necessary changes to USS. A JRG statement was released which can be read online at http://www.uss.co.uk/news/Pages/StatementfromtheJointReviewGroup.aspx . The principles agreed in the JRG are also set out there.
The JRG has now been disbanded, with the JNC receiving two sets of formal proposals, one from the EPF and one from the UCU. It is anticipated that the JNC will take a decision on 7 July 2010. At that stage an outcome is expected and all USS employers, including Royal Holloway, will be asked to carry out statutory consultation with the individual members of the scheme who are in their employment. The timetable and logistics of this will be communicated at the appropriate time, as this is not yet set out.
In the meantime, you are encouraged to look at both the EPF and UCU proposals, available on the EPF website:
www.employerspensionsforum.co.uk/en/pension-schemes/uss-review.cfm.
The changes to USS proposed by the employers are seen by them to be the minimum that is necessary in order to address the massive pressures facing the sustainability of USS arising from increased longevity and other factors. They also go some way to meeting the principles agreed by JRG.
It is important to note that under the employers’ proposals current USS members retain their final salary scheme. Employers want to retain high quality pension schemes and prevent problems that would threaten the long-term future of the scheme.
The employers’ key proposals for change are:
• Current scheme members will retain their Final Salary benefits, with the introduction of a career average revalued earnings (CARE) section to the USS scheme for new entrants. This change to a CARE scheme (another form of a defined benefit pension) would be applicable for new entrants only with effect from the implementation date of the changes to USS.
• The employers will maintain their contribution rate of 16% with the objective of meeting all the past and future liabilities without further economic calls on the employers beyond the current rate.
• The employers propose that the Normal Pension Age for all active members in USS should be age 65, with transitional arrangements put in place for staff that are currently nearing retirement.
• Subject to the change to an NPA 65 being agreed, it is proposed that members aged 55 or over, with 5 or more years’ service, should be eligible for a flexible retirement scheme.
• From the date that the changes are introduced in USS, the employers propose that there is an increase in the level of member contribution from 6.35% to 7.5% to assist in meeting the costs of the scheme arising from increased longevity.
The above proposals put forward by the EPF are a balanced and reasonable package of reform, with current USS members still eligible for a final salary pension. For USS to continue to be an attractive and affordable defined benefit pension scheme, the EPF believes it is essential to stabilise the cost, and for future costs to remain at an affordable level for both employers and employees.
The employers’ principal concern is the threat to future financial stability of the higher education sector if no changes are made to reduce the risks and associated costs of USS. For example, the 2% increase in employers’ contributions from 14% to 16% of pay which came into effect in October 2009 is costing the sector some £110m a year. The anticipated downturn in HE finance over the next few years is likely to put even more pressure on institutions and their ability to meet escalating pensions’ costs.
The EPF believe that changes are a necessity and the employers’ proposals will help meet the objective of maintaining an affordable, sustainable and attractive scheme.