Last Friday, April 27, there were two important meetings for the future of the USS dispute. The first was a meeting of the Higher Education Committee (HEC) of UCU, at which were presented the draft Terms of Reference (ToR) for the Joint Expert Panel (JEP) convened to consider the USS valuation. The second was a meeting of the Joint Negotiating Committee of USS, which the trustee had required to confirm immediate instructions for the future of the scheme. Several of the same people from UCU were at both meetings.
It is clear that the HEC meeting was fractious. Rachel Cohen has reported that the ToR were only received by the members of HEC at the start of the meeting, and that only twenty minutes were made available to study them. Moreover, the Chair of HEC, Douglas Chalmers, ruled that the Report containing the ToR would be voted on before the numerous motions which had been proposed, and that if it was passed the majority of those motions would fall by default. As Adam Ozanne has described the meeting, these rulings were challenged at length, leaving little time to discuss the Report or the ToR themselves. These challenges failed, and eventually the Report was passed. Also passed were motions committing the JEP to robustly challenge the methodology of the current USS valuation; committing HEC to pursue changes in UK pension regulations; and demanding that the equality and diversity implications of any USS changes be adequately recognised.
How far do the ToR for the JEP offer encouragement that UCU members were right to vote to suspend strike action, and to place hope in the proposed Panel? There are some grounds for optimism. The six members of the JEP will only be able to reach conclusions by consensus, with no casting vote for the Panel chair. This ensures that the (5+1)/11 majority at the JNC, which has been so damaging to USS member interests the past, cannot be repeated at the JEP. It is also good to see it confirmed that the JEP will have access to a proper range of expert witnesses, from the Scheme actuary to the Pensions Regulator, so that it can do its work in a properly informed and authoritative way.
But the grounds for pessimism about the panel are more substantial. There is a lack of transparency in both the appointments process to the JEP and the proposed workings of the Panel. All matters concerning the JEP are to be delegated from HEC to the Superannuation Working Group (SWG) of UCU. SWG will select the three UCU members of the Panel at a meeting on 16 May, on the basis of submitted CVs and 500-word supporting statements from self-nominated applicants. This process offers little openness or democratic oversight, and the selection criteria, while reasonable, offer little scope for objectively determining the most appointable candidates.The whole approach seems recklessly casual, given the enormous influence the three appointees will have on the future of the USS scheme.
Equally serious is the near-complete secrecy which will surround the deliberations of the Panel itself. Both the contents of panel meetings and all the material provided to the panel will be confidential – available not even to the UCU leadership – and only “agreed action points” resulting from meetings will be published. It is very hard to see what the justification for this must be: the underlying data on USS members should be straightforward to anonymise, and none of the major participants has obviously legitimate commercial secrets. It is possible that the valuation work of the actuarial companies involved uses proprietary technical tools, but it seems extraordinary that such sweeping confidentiality has been agreed without a clear rationale. The purpose of the Panel is not only to produce a set of results, but to produce results in which USS and UCU members can feel confident. It is hard to see that the extreme degree of confidentiality proposed about evidence and reasoning is compatible with that. The UCU leadership owe members a better explanation of why they have agreed to it than either they or UUK have offered so far.
The panel aims to report on the 2017 valuation in September 2018, and some time thereafter on the USS valuation process generally. As we reported last week, this means that its recommendations are unlikely to be implemented until considerably later than April 2019. In light of that, we should welcome the fact that the JNC on Friday withdrew the January 23 proposal for a 100% Defined Contribution scheme to be imposed from that date. No alternative proposal was tabled, which means that as things stand there is no JNC decision for benefits and contributions for the three-year period beginning April 2019.
USS has now released a statement to say that (in line with its earlier statements) it will nonetheless begin completing the current valuation, simultaneously with the deliberations of the JEP. In practice this means preparing to increase both employee and employer contributions from April 2019 to the degree necessary to maintain current benefits under the November valuation. The additional costs implied will be shared between employers and employees in a 65:35 ratio, and it seems likely that the increases will be introduced progressively over a period of time. (See Mike Otsuka’s Twitter thread on this point.) The 1% employer “Match” of voluntary DC contributions will be removed from April 1 2019, to cover part of the increased cost of benefits since 2014, and there will likely be a reduction in the employer contribution to DC pots for those earning above the salary threshold for DB of £55,550. The balance between that reduction and increases in the overall contribution rate will be decided in due course by the JNC.
In the view of the CUCU branch committee, the move to cost-sharing from April 2019 remains the least bad of the possible short-term arrangements, for the reasons we gave in our report on the papers for last Friday’s JNC, and it is also appropriate to make some savings from employer DC contributions before increasing contribution rates. The worst short-term possibilities have therefore been avoided. But we remain a long way from an acceptable lasting settlement for the future of USS. We hope therefore that the cloak of secrecy planned around the JEP will not prevent it from coming up with a much better long-term solution.