The warning comes ahead of a meeting tomorrow between employers, represented by UUK, and the University and College Union (UCU) – the latest opportunity in year-long negotiations for union leaders to suggest ways of making the scheme secure and sustainable.
Without the recent JNC decision, USS would have introduced the default position to significantly increase both the employer and member contributions to meet the £1 billion annual increase in the cost of USS pensions.
Most universities, who already pay in 18% of salaries towards pensions, can't afford to pay more into pensions without diverting money from other central areas, such as teaching or research, reducing their positive impact. Increasing contributions could damage the high standards that students, research funders and others rightly expect. It could even undermine the sustainability of some universities.
The only way of avoiding such potentially damaging increases in contributions and managing future risk to the scheme is for pension benefit reforms to be agreed ahead of the 30 June deadline.
Following 35 meetings between employers and union leaders since January 2017, the JNC - the formal and legally established forum for deciding changes to USS – approved the employer proposal. This will meet the concerns of the Pensions Regulator by making the scheme secure and sustainable, and offer market leading defined contribution pensions to staff with employers paying in 18% - double the private sector average.
It is disappointing that strike action has been pursued after the conclusion of the JNC process, which UCU have been involved with throughout. Even following two extensions to the negotiation deadline, UCU failed to put forward a credible and affordable proposal.
A spokesperson for Universities UK said: "Having failed to put forward a credible suggestion in the past year, we look forward to union leaders' proposal that provides good pensions, is affordable and secures the future of USS. The JNC voted in favour of the employer proposal that, we believe, meets these requirements in the best way possible, given the challenges the scheme faces.
"We will of course consider any credible and affordable alternative to the JNC decision, but it would be irresponsible of employers to walk away from the JNC ruling without an alternative being agreed. No deal would put jobs and the high quality of education that students rightly expect at risk.
"Seeing any strike action is disappointing, but the majority of universities are reporting low levels of overall impact. This is not unexpected as UCU membership is relatively low in density, only 12% of active USS members in higher education voted to support this strike."
USS is one of the largest private pension schemes in the UK and is the principal scheme for academic and comparable staff in UK universities and other higher education and research institutions.
The USS Trustee has already confirmed that, without changes to the scheme's benefits, it would have been forced to use a legal mechanism in the USS rules (rule 76.4) to trigger significantly increased contributions to the scheme. Under this rule certain elements of the existing scheme would immediately be removed, for example the employer match and possibly also other benefits being removed such as contributions on salary above the salary threshold. In addition, activation of this provision would see employer contributions rise from 18% to over 24% of salary, increases which would quite simply be unaffordable. Substantially higher member contributions – a cost increase of more than a third – would also be imposed on scheme members to preserve the same benefits.
The cost of USS pensions has risen by one-third in the last three years and the scheme has a £6.1 billion deficit.
Following a series of discussions lasting longer than one year, on 23 January 2018 the Joint Negotiating Committee – the formal and legally established forum for deciding changes to USS - supported a proposal by Universities UK, representing 350 higher education employers, to make the scheme sustainable. UUK also made the commitment to reintroduce defined benefits if the economic conditions improve.
Over that period, the union tabled only one proposal, which would have involved employers increasing contributions by around £500m every year. This would necessitate large cuts to budgets in other areas such as teaching and research, and put many jobs at risk. It would also require a 35% increase in member contributions for less than the current pension offered.
From the end of March, a two-month consultation will begin, when members of USS, will be asked for their views on the Joint Negotiating Committee's proposal.
Pension benefits already built up are protected by law and cannot be changed retrospectively.