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A gap between jobs could mean you’re much poorer in retirement

July 19, 2010

If the employers’ pensions proposals are adopted, then a break in continuity of employment in excess of six months means new entrants to the USS pension scheme will re-enter the scheme on CARE with their final salary element being deferred (i.e. 2.5% cap on uplifting).

On the other hand, there is provision in the proposals to have a break in employment of up to 5 years where you can return to the same employer on your original final salary pension arrangement BUT the decision to allow this is to be at the institution’s discretion (so, for example, PVCs could be allowed to go to research councils and return to their final salaries benefits but career break staff might not be allowed back onto final salary). UCU suspects that this particularly will hit fixed term and hourly paid staff hardest.

Remember:

  • Only employers so far have been consulted, not employees. Your union thinks you should be consulted over your future.
  • In a ballot of members in May this year, 96% of voting UCU members voted to reject the employers’ proposed changes, with a similar number backing UCU’s alternative proposals to share costs between employers and staff.
  • £627,000 of taxpayers’ money was used to support the employers in preparing and pushing their proposals.
  • Some could get up to £127,000 less in pre-tax pension income under the new proposals
9 Comments leave one →
  1. July 19, 2010 8:03 AM

    Researchers – those most often on fixed term contracts – are encouraged to be “mobile” and take contracts in other countries. This is supposed to make Britain’s research base stronger, more competitive, and (dare I say) it “World Class”.

    So how is this proposed change likely to impact those of us who have followed this advice and now have a year or two in an incomprehensible foreign pension scheme as well as a couple of years in USS?

  2. July 19, 2010 8:11 AM

    Badly, it would appear.

  3. In the abscence of Facts permalink
    July 19, 2010 8:47 AM

    To take each point in turn.

    The employers will consult on the employees – this is a statutory requirement.

    The UCU ballot only covered 25% of USS membership raising a question as to why the body that has represented 100% of employees in USS for 35 years is only able to contact 25% of them.

    The difference between the two is not £127k. The UCU calculation takes no account of the 3/80ths cash lump sum, the reduced contribution rate that employees will pay, the difference in longevity and career profiles. Still when you’ve made up a number, best to stick with it.

  4. July 19, 2010 10:33 AM

    Interesting. Despite the title of the above message promoting ‘facts’, this message (from management?) offers factually incorrect details and misrepresents what we have said.

    To respond to each point in turn.

    1. We look forward to any proper consultation with all USS members. None has yet been promised or arranged, to our knowledge. UCU’s position is that changes in USS must only be incorporated after full consultation with scheme members and that members should not be disadvantaged by any changes. If you agree on that issue, then we are in accord on that.

    2. The Employers’ Pensions Forum proposals contain no suggestion that the UCU should change its role (as the representative of all USS members) in USS. It seems you have a different view, supported by the figure of 25% you pluck from the air. You disagree with the employers on this issue, if you wish to remove UCU representation. Of course, UCU is not the forum for consulting with the whole of the USS membership. That USS rules have us established as representing all members (http://bit.ly/dDqpBn) does not mean we are able to contact all members. Do you suggest that the opinion of 97% of those contacted would not be significantly reproduced across the membership, and upon what rational basis would you found that assumption?

    3. That is indeed the difference. See the calculations here. Go back to that calculation, make any adjustments you feel are missing and tell us, in that example, how much less that person would get under the employers’ proposals. It’s still a huge amount, isn’t it?

  5. In the abscence of Facts permalink
    July 19, 2010 11:08 AM

    - A formal consultation exercise of at least 60 days is required by statute. This will involve 400 employers and cover both the 130,000 current USS members as well as prospetive members. This process will only be initiated following the USS Trustees meeting on 22 July. If they assent to the proposals then they will ask the employers to initiate the consultation exercise.

    – UCU balloted around 30,000 of its members. USS has 130,000 active members, therefore UCU balloted only around 25% of the USS membership. You are correct in stating that the employers have not suggested any change on the employee representative side, but there is a sense that it would at least be in UCU’s interest to include another union in the interests of democracy as this would allow the pool of members that could be contacted to be widened. As to the UCU opinion poll, given the distortion of the facts (the £127k you continue to quote being the prime example) coupled with a binary vote which did not allow for any comments, the result of the poll was hardly a surprise.

    3 – The Calculation are wrong for exactly the reason I gave above. As to referring to the UCU ‘calculation’ If you can work the figures through from that article then answer me these questions; where is the lump sum? how is the figure of £15,704 derived? does the calculation factor in the differnce in contribution rate? does the calculation take account of the different longevity assumptions?

  6. July 19, 2010 1:13 PM

    We look forward to any consultation process and hope that it will be meaningful consultation. We hope that no more tax-payers’ money will be used to promote the employers’ proposals.

    We’re glad to agree that the UCU should maintain its representative role. There are useful questions of course to ask about stakeholder representation.

    You have been invited to offer your own calculation using the context of our example. We suspect you won’t as it will still demonstrate a large detriment. Our calculations are based on the detail of the employers’ proposals.

    Longevity has been dealt with here.

  7. In the abscence of Facts permalink
    July 19, 2010 1:31 PM

    Thank you for your kind response. Having read through the various bid applications on the HEFCE website it appears that only a portion of the funding is in relation to work on USS, with the funding also being targetted at work on TPS, the Local Governement Schemes as well as the University specific Self-Administered Trust schemes. I would assume that HEFCE will have provided guidance to the employers on what they expect for their money.

    I think given the nature of the membership of USS,this will be one of the most closely watched consultation exercises. I would also expect a high number of responses from the membership – even if only 10% provide feedback that will be 13,000 responses that will need to be reviewed. I understand from USS that they will try to make the process as transparent as possible.

    I agree with you re the stakeholder representation question, and on the employer side there are also questions to raise re the dominance of UUK.

    The figures I have seen from the employers side give a range of £23k worse off to £21k better off under CARE Vs Final Salary over the period in retirement. As with the UCU figures produced, a certain skepticism should be applied as no two individuals have the same career and as a result a like-for-like comparison is never going to be acheivable. It could be argued that UCU have taken the worst case, and not included certain figures, and that the employers have taken the most optimistic scenario.

    I would still request though that if you are to defend the £127k figure that UCU need to answer two basic questions; where is the lump sum? how is the figure of £15,704 derived?

    Finally, your view that longevity is not a problem is simply contradicted by the facts. As at the 2008 valuation the contribution rate increased by 2% which was solely due to longevity pressures – this 2% costs the sector £110m per annum. The actuaries are now advising USS that there is a further 1% adjustment (£55m per annum) that is likely to be required from March 2011. If the sector is paying £165m per annum in additional costs I’m not sure why this would not be considered a problem.

  8. Another academic permalink
    July 22, 2010 1:20 PM

    The employers’ proposals under CARE make no provision for the automatic payment of a lump sum at retirement. Let’s be clear about that before arguing that it should be factored in all calculations.

    The UCU’s figures are given as ‘at least’, so are not worse-case scenarios. There are worse. I agree though that we can assume the employers’ scenarios are the ‘best case’ they could find.

  9. July 26, 2010 3:19 PM

    We should point out that the employers have in fact boycotted a vote of all USS members, something which IAOF (representing the employers) chooses not to mention. More details here:

    http://www.ucu.org.uk/index.cfm?articleid=4759

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