Message from the Vice-Chancellor on USS reforms

Over the last few days, I have received several letters and emails from colleagues who asked for further information on the University’s position on the USS benefit reforms. These reforms were agreed as part of the 2020 valuation that were put in place on 1 April 2022.

These questions followed a recent UCU press statement, which noted that the USS financial update of February 2022 showed that its financial position had significantly improved. The UCU’s press statement stated that the USS was no longer in deficit and the reforms to the benefits were no longer required.

While it is good news to see an indicative improvement in the USS funding position, we have received further information from the USS and Universities UK, and we have asked for independent advice from our advisors Mercer. They have all confirmed that the UCU’s position is not correct. I outline the reasons for this below.

Firstly, we have seen an improvement in the last monthly monitoring position as a direct result of these agreed benefit reforms. Indeed, the scheme liabilities have been calculated taking into account these reforms. Appendix C of the report clearly shows the scheme with a deficit of £6.3bn without these reforms.

Secondly the USS has verbally advised the USS Joint Negotiation Committee that to maintain the previous benefits, the combined contribution rate (from employer and employee) would still be in excess of 40% of salary. In other words, a reversal back to the pre-2020 valuation benefits and contributions would result in a very different monitoring report. 

It is important to note that legally USS had to implement the 2020 valuation benefit reforms. Otherwise, employer and member contribution rates would have had to start to increase significantly over the coming years.

Finally, it is also important to note that this is a regular monitoring report and not a full actuarial valuation, which would require a full process including revised covenant assessment and statutory consultations with involvement of the Pension Regulator. The USS has stated that the funding position remains very volatile and changes month to month.

Of course, should the conditions seen in the February 2022 monitoring prevail when the next valuation is undertaken it might be possible to increase benefits or reduce contributions or some combination of both. The optimal time to hold the next valuation of USS remains an important question, and this has to happen before the end of March 2023.  A more detailed funding update has been requested from USS for the 31 March 2022 position and, if it is decided to progress with a full valuation at this date, we would support this.