Tensions are rising at Cardiff University where staff and students at Cardiff are beginning to question whether their Vice-Chancellor really does represent their best interests.
Over 700 Cardiff University staff, including a self-organised group of 160 Cardiff University Professors, is urging the Vice Chancellor Prof Colin Riordan to use his influence with Universities UK (UUK) to resolve deadlock over a national row over staff pensions. The University Superannuation Scheme (USS), in response to pressure from both The Pensions Regulator and UUK has proposed to close down the so-called Defined Benefit (DB) aspect of the scheme, which guarantees lecturers a pension based on their average salary and years of service. The Universities and Colleges Union (UCU) does not agree to what it sees as an unnecessary and drastic cut to staff benefits and has called for four weeks of industrial action beginning on 22nd February. Each side is accusing the other of intransigence.
The imminent prospect of strike makes many students uneasy, and indeed thousands of Cardiff students have already written to Professor Riordan not only to express sympathy with their lecturer’s need for financial security, but also to demand a refund of their tuition fees for any missed contact hours. At the same time, the professors’ group circulated an open letter addressed to the vice-chancellor amongst staff, asking him to reconsider his stance that there is no other solution to the deadlock than to remove the pensions guarantee.
Remarkably, Prof Riordan sent a pre-emptive response to staff on the evening of Saturday 10th February – before he even had received the letter – which was still in circulation and had received hundreds of further signatures. His response reinforced his position that the closure of the DB scheme was inevitable, there being “…no credible course of action on offer that could lead to [alternative approaches]”. He further wrote that “…retaining the present scheme has become unaffordable, and moving to a defined contribution scheme is the least unpalatable alternative available.” Even UUK acknowledges that a DC scheme is far less attractive than the existing DB scheme and models developed for UUK show that lecturers stand to lose thousands of pounds a year.
An unnamed signatory of the letter commented,
His response is quite extraordinary. We are quite flattered that our letter should provoke a response before we have even sent it to him. However, it hasn’t escaped our notice that he has come to this conclusion from the comfort of his office and his pay-package of £247,000 plus another £10,000 in bonuses and benefits and additional pension payments of £45,000 last year alone. Importantly, Prof Riordan has not consulted staff on what our university’s approach to the apparent pension crisis should be, and whether the DC alternative really is the ‘least unpalatable’ for us. Pension losses of around 50% look extremely unpalatable to most of us.
For now, though a strike seems inevitable and tensions are rising. Staff and students at Cardiff are beginning to question whether their vice-chancellor really does represent their best interests.
Pressure is rising at a national level on University Management to resolve an impasse pertaining to lecturers’ pensions. USS, the University Superannuation Scheme, has projected a deficit of £7.5b because The Pensions Regulator (TPR) has told them they need to de-risk the scheme.
Universities UK (UUK) – an association representing Higher Education Employers – is proposing that the core and most important feature of USS, the Defined Benefits Scheme (DB) be closed down altogether. In a DB scheme university employees and employers pay into a pension scheme that guarantees staff a pension based on their average salary and years of service.
The guaranteed part of USS has been a major attraction for academics, who tend to forego higher salaries from industry in exchange for doing a job they love – teaching students and doing research. It also presents a cost to the universities who must bear the risk associated with meeting guaranteed pension payments. Until now this trade-off has suited both sides: a good pension scheme has made up for the loss of earnings in comparison to other highly qualified positions outside of the university sector and the employers have made savings on their current salary bills. The cost of risk has increased and UUK now wants to close its DB scheme and replace it with a Defined Contribution Scheme (DC). In a DC scheme universities and staff continue to contribute in the same way but all payments go into an individual investment fund which is turned into a pension through the purchase of an annuity. The cost of the annuity includes the cost of risk which is now to be borne by the member of staff and not the employer. According to models developed for UUK, academics stand to lose thousands of pounds a year.
The pension modeller developed for UUK estimates the cost to staff of switching schemes. Hidden away in the tables at the back we find that the USS member aged 47 with 22 years’ service who is earning £50,000 and will retire at 65 would receive an annual pension of £16,000 under the continuing DB scheme. Once in the DC scheme, and required to purchase an annuity to provide a guaranteed payment for life, the annual pension drops to £8,500. For a new joiner aged 35, earning £30,000 and retiring at 65, the DB pension would be £18,000 and the pension available from the DC scheme would be £9,500.
USS was launched in 1975 to provide university staff with a pension that they could live on and which allowed universities to attract and retain staff in competition with other sectors. The prospect of a return to a low income or uncertain retirement is undermining staff morale –already very low. It also threatens universities’ ability to attract and retain highly-qualified staff at a national, let alone an international level (Brexit has already led to EU staff seeking and taking up positions in other EU countries). It opens up the prospect of frantic salary competition, not just for the academic stars and super-stars but for all the high quality staff that are needed to attract students and research grants.
UCU, the University and Colleges Union disagrees that USS is facing a deficit. The scheme has assets of £60bn which is more than enough to cover projected liabilities for the next 40 years. The projected deficit arises from planning to meet the absurdly pessimistic assumption that all pre-92 universities go bankrupt simultaneously in the next few years. At this point all contributions to the USS cease but pension liabilities continue.
Negotiations between UCU and UUK have failed to reach agreement and UCU members have – in an overwhelming majority – now voted for sustained industrial action. Beginning on 22nd February, lecturers will go on strike for a period of four weeks, initially withdrawing their labour for two days per week, and then escalating to three, four, and five days per week. The university sector has never seen industrial action at that scale, and students are getting understandably concerned. Over 70,000 students have signed petitions demanding compensation from their universities in the lead up to the forthcoming strike action.