What’s to CARE about? Pensions concerns mount.
Currently USS accrual rate is based on the eightieths of the USS member’s final salary (see ‘notes’, below). Under the employers’ proposals this will change to eightieths of a member’s adjusted average salary across the period of their membership of USS. The shift to a Career Average Revalued Earnings (CARE) pension scheme on the face of it seems more equitable: pensions are based upon the average earnings throughout careers and this means that members don’t benefit disproportionately from large increases towards the end of their career.
However, in occupations which have incremental progression and where promotion is a reasonable expectation, the denominator in the accrual rate needs to be significantly lower for the average pension to remain the same. (The ‘accrual rate’ is the rate at which future benefits will accumulate, based on a formula linked to the scheme member’s pensionable earnings. This formula is usually expressed as a fraction of defined salary). For academic staff, where many start as contract research staff before progressing to lecturer/senior lecturer/professor, UCU figures indicate that in USS this lower denominator figure would be one fifty-fourth of average career earnings.
Thus, while on the surface eightieths seems similar to what existing members currently receive, the benefits accrued for new members will be significantly lower than for existing members: this inevitably creates a two-tier pension scheme.
And the problem with a two-tier pension scheme are two-fold: firstly, it creates an unfair division in terms of how much people doing similar jobs on similar pay get to retire on; and secondly, it later gives the employers and opportunity to say ‘this isn’t fair, we should create parity between these two tiers’, and downgrade everyone to the lower of the two tiers.
USS currently determines your salary for each period of 12 months that you have been a USS member, over a maximum time of 13 years before your retirement, and revalues up each annual salary, except the last 12 months, using the Retail Price Index measure of inflation.
Your inflation-adjusted pensionable salary is whatever comes out best – either the highest revalued annual salary during the last three years or your highest revalued salary averaged across any three consecutive “best years” over the last 13 years.
The actual amount of pension you get is calculated as an eightieth of your pensionable salary, multiplied by your years of pensionable service. For the lump sum it is 3/80ths.
1/80 x pensionable salary x pensionable service