As part of the resolution of the USS pensions dispute between October 2021 and June 2022, the University of Essex and the Essex branch of UCU have agreed to make this joint statement about the future of the USS pension scheme. It reflects and explains a range of shared views that we have discussed throughout the dispute and the previous USS consultation processes, and our shared recognition of the importance of affordable, quality pension provision as part of the overall pay and reward arrangements at the University of Essex and that the current cost of the scheme to employers and members is at the limits of affordability.

A pension scheme for the long term

We believe USS should be run in a manner that reflects the long-term nature of the scheme and that can enable employers to offer valuable retirement benefits for members that are affordable, sustainable and not subject to unnecessary fluctuations in response to short term volatility in the value of the scheme’s assets and liabilities. We believe this requires:

  • A review of governance arrangements

An urgent governance review, prior to the next actuarial valuation, to build confidence that the governance of the scheme is serving the interests of members; to bolster transparency in decision making; and to enhance collaboration among all parties of the scheme – the Trustees, and representatives of employers and members – to generate independent views and undertake joint working on a range of relevant issues.

  • A fit-for-purpose investment strategy

The scheme’s investment strategy should reflect the long-term commitment provided by employers in the scheme through the strong covenants they have provided, enabling the scheme to be run on the basis of long-term objectives and permitting significant investment in growth and return-yielding assets that improve the value of the scheme for individual members and for employers.

  • A new approach to scheme valuations

The current approach to scheme valuations has resulted in a loss of confidence amongst some members and employers. We support a new valuation as soon as possible, including a new approach that can support greater sustainability, predictability and value for money for employers and members.

A new approach is required that is based on appropriate and evidence-based levels of prudence and that implements a valuation strategy (as advocated by the Joint Expert Panel) that reflects the characteristics of the scheme; is developed collaboratively by the Trustee and representatives of members and employers; and prioritises the enhancement of benefits as soon as this would be affordable and sustainable, including reflecting on the changes made as a result of the 2020 valuation.

A sustainable scheme in which members, potential members and employers each have a stake

We recognise the importance of members and employers each having a stake in the future success of the scheme and sharing in the risks and rewards associated with it. We believe this requires:

  • New approaches to scheme design

UUK on behalf of employers and UCU on behalf of members should jointly explore options for alternative design that could offer better value for members and employers, including conditional indexation which could provide a new mechanism for members and employers to share risk and reward arising from the scheme.

The JNC should develop a set of shared assumptions for the evaluation of changes to the benefit structure that promote the ability of the JNC to recommend changes to the scheme that are affordable, sustainable and command the confidence of all members and employers. This will enable potential scheme changes – which we recognise may come from UUK, UCU or the USS Trustee – to be assessed on an agreed basis.

  • Sustainable shared contributions

Contributions to cover the costs of the scheme should continue to be shared in agreed proportions between employers and members, to ensure that future development of the scheme results in contribution rates that reflect the value of the scheme to all.

  • A scheme that is affordable for all eligible employees

Urgent work is required to develop lower cost options for eligible members for whom USS membership is currently unaffordable, that would enable them to commence saving for retirement in USS. Alternative options should include regular opportunities to change schemes to encourage retirement planning, including a defined benefit component.

A scheme that aligns with University values

  • Responding to the Climate Emergency

While we recognise that the USS Trustee has already taken steps to adopt environmentally sensitive strategies and practices, prior to the next valuation the approach to investment of the scheme’s assets should be reviewed further in light of the climate emergency that the University has declared.

  • Ensuring fairness in the way the scheme develops

The USS Trustee should undertake and publish information to demonstrate that it has considered the impact of changes to the scheme on groups with protected characteristics when evaluating the impact of changes to the scheme.

Changes that have differential impact across member groups should be evaluated carefully with a view to the fairness of the scheme to all members.

  • Openness, collaboration and transparency

We recognise the need for the USS Trustee and the representatives of members and employers to rebuild trust through an open, collaborative and transparent approach to working together that demonstrates shared commitment to the long term, sustainable success of the scheme for the benefit of members and employers.