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University bosses have been accused of misleading claims over the scale of cuts to staff pensions after new research into controversial benefit reforms concluded younger workers were set to lose up to £200,000 in future retirement income.
The claim by the University and College Union, a body representing 130,000 higher education staff, followed the publication this week of findings that concluded employer assertions about the impact of pension cuts on tens of thousands of younger staff were a “serious underestimate”.
The findings will fuel tensions between UK university employers and unions, which have been stuck in a deadlock over cuts to staff pensions since April 2021.
The analysis, by academics at Cambridge, Edinburgh and Sussex universities, and the Helsinki Institute of Physics, considered the financial impact of benefit cuts on 400,000 members of the Universities Superannuation Scheme, aimed at plugging a £14bn funding deficit identified in a 2020 valuation.
University employers have argued that without the reforms to defined benefit pensions, members and employers would face steep increases in their contributions.
The changes introduced in April included slower benefit accrual and a reduction in the salary threshold on which guaranteed pensions could be earned from £60,000 today to £40,000.
However, the analysis contested claims made by Universities UK, the employer body, about how deeply members would be impacted, particularly younger members.
“A repeated claim made during the formal [pension reform] consultation by Universities UK that those earning under £40k would receive a ‘headline’ cut of 12 per cent to their future pension is shown to be a serious underestimate for realistic CPI projections,” said the analysis, published in an online journal hosted by the University of Cornell.
UUK said: “We have not made misleading claims. It is reasonable for us to conclude in headline terms — using the example personas developed by USS itself to show the impact — that reductions in retirement benefits will be in the range of 10-18 per cent.”
“The employer proposal secured a viable and implementable solution to the 2020 valuation, which retains a significant element of defined benefit within the future pensions earned by members.”
According to the analysis, nine in 10 USS members earning under £40,000, or 76,800, would lose more than 15 per cent of their future pension, with percentage losses extending to 40-45 per cent for “realistic” values of CPI.
The study authors — which include a current UCU negotiator — drew on data from a pension modeller, developed by the USS Trustee, with UUK, to help members and employers understand how they would be impacted by the proposed cuts.
The loss from the cuts to current USS scheme members, in today’s money, was calculated to be £16bn-£18bn with most of the 71,000 staff under the age of 40 losing between £100,000-£200,000 each over the course of their retirement, according to the analysis.
“This new research is yet more damning evidence that employers lied about the scale of their pension cuts,” said Jo Grady, general secretary of the UCU, which represents USS members.
The Pensions Regulator said it would be for UUK to address and investigate any claims about misleading claims made during the consultation, in the first instance. USS declined to comment.
Additional reporting by Bethan Staton
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