Hun­dreds of jobs at risk from fresh UK pensions cost hike

THE (Times Higher Education) - - NEWS - Jack.grove@timeshigh­ere­d­u­ca­

Hun­dreds of UK aca­demics risk los­ing their jobs if a “com­pletely un­ex­pected” in­crease in pen­sion costs that will add al­most £140 mil­lion to the wage bill of modern uni­ver­si­ties goes ahead, em­ploy­ers have warned.

In a brief­ing sent to in­sti­tu­tions on 16 Oc­to­ber, the Uni­ver­si­ties and Col­leges Em­ploy­ers As­so­ci­a­tion (Ucea) sets out the likely fi­nan­cial im­pact to the sec­tor of “un­prece­dented” in­creases in em­ployer con­tri­bu­tion rates to the Teach­ers’ Pen­sion Scheme (TPS), which runs pensions for about 43,000 staff in post-92 uni­ver­si­ties, an­nounced by chief sec­re­tary to the Trea­sury Liz Truss last month.

Un­der the pro­posed changes due to take ef­fect in Septem­ber 2019, em­ploy­ers will be re­quired to pay an ex­tra 7.2 per­cent­age points of salaries into the TPS, tak­ing their over­all con­tri­bu­tion rate in Eng­land and Wales from 16.48 per cent to 23.68 per cent – a 44 per cent rise.

That is sig­nif­i­cantly higher than the 18 per cent of salary paid by the typ­i­cally older in­sti­tu­tions af­fil­i­ated with the Uni­ver­si­ties Su­per­an­nu­a­tion Scheme, which will in­crease to 19.5 per cent in April and 22.5 per cent in Oc­to­ber 2019 un­der plans an­nounced in July.

It is also higher than the 23.5 per cent of salary con­tri­bu­tions sug­gested for USS em­ploy­ers by the Uni­ver­sity and Col­lege Union in Jan­uary, which uni­ver­si­ties dis­missed as “un­af­ford­able”. Em­ployee con­tri­bu­tions for TPS mem­bers will re­main un­changed.

Greg Walker, chief ex­ec­u­tive of Mil­lionPlus, which rep­re­sents modern uni­ver­si­ties, said the 44 per cent rise had “taken ev­ery­body by sur­prise” given the ex­pec­ta­tion of a 2 per­cent­age point in­crease next year.

“If the pro­posed rise in em­ployer con­tri­bu­tions for USS threat­ened the health of older uni­ver­si­ties, this now ap­plies equally for modern uni­ver­si­ties, if not more so,” Dr Walker said.

The in­crease fol­lows what Ucea de­scribes as a “com­pletely un­ex­pected” reval­u­a­tion of the dis­count rate used to cal­cu­late the strength of pub­lic pen­sion schemes, which has led to the sud­den “sub­stan­tial in­creases” in em­ployer costs which will present an “ex­cep­tional chal­lenge” to about 70 modern uni­ver­si­ties next year.

Ucea es­ti­mates that the new rate will add £130 mil­lion to the pay­roll costs of TPS-linked em­ploy­ers in Eng­land and Wales – the “equiv­a­lent of tak­ing the fees paid by 14,000 un­der­grad­u­ate stu­dents in Eng­land and spend­ing that fee in­come on pensions con­tri­bu­tions”, it says.

The ad­di­tional an­nual cost for eight uni­ver­si­ties in Scot­land will be £8 mil­lion a year, it adds.

Uni­ver­si­ties will be hit far harder by the changes than schools and col­leges, Ucea also says. While the Trea­sury has in­di­cated that ex­tra funds will made avail­able to cover the in­creased costs, the De­part­ment for Ed­u­ca­tion has “sug­gested sup­port for schools would be pri­ori­tised” and it is “not clear” whether uni­ver­si­ties would re­ceive any ex­tra money at all, it says.

Uni­ver­si­ties will need to make sub­stan­tial sav­ings in staffing costs if the cost in­crease went ahead as planned, the brief­ing pa­per sug­gests.

One in­sti­tu­tion had in­formed Ucea that the cost in­crease would re­quire a “nec­es­sary re­duc­tion in the re­gion of 5 per cent of teach­ing work­force” while an­other said it would add £1.3 mil­lion to its cost base and it “may need to shed around 120 staff”.

An­other said the “im­pact of staff num­bers…will be in­evitable and sig­nif­i­cant”, said Ucea in its brief­ing pa­per, which asked the Trea­sury to pause the val­u­a­tion process to im­ple­ment a full re­view and clar­ify whether in­sti­tu­tions would re­ceive ex­tra money to cover ad­di­tional costs.

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