Members of the University and College Union are striking over changes to the Universities Superannuation Scheme which will see the average lecturer around £10k worse off a year in retirement. The employers’ group Universities UK says the scheme has a deficit of more than £6bn and the pensions must be cut. The changes made would see lecturers pay more in and have their pensions cut.
Now, accepting the USS calculations at face value, this deficit needs to be addressed, and this is what is underpinning the strikes. The USS has proposed to change the scheme from a ‘defined benefit’ scheme, which would guarantee members a fixed amount in return, to a ‘defined contribution’ scheme, where your pension depends exclusively on how your individual investment portfolio performs. This is where the problem lies. For instance, because they are trying to peg the future payments to how well the portfolio performs, they are completely shifting the risks from the pension fund to the individual. This may sound reasonable to many, but it shouldn’t be forgotten that those running the funds make billions from our humble contributions. If the changes were to be taken up in their current form, experts have estimated people investing their pensions in the fund can be up to £10k worse off a year.
What is particularly unsettling about this is that, while the USS is battling to significantly reduce the pensions of hard working lecturers, the Chief Executive, Bill Galvin, has saw his salary increase from £484,000 to £566,000, while also accruing £17,240 in pension contributions with an additional lump sum of £51,720. On top of this, he is also eligible to participate in an individual three year Long Term Incentive Plan (LTIP) which, depending on his performance, can amount to as much as £200,000 a year.
These sums of money are infinitesimally small in the context of pensions, and they would not make the world of difference if evenly distributed among members of the fund. However, for a pension fund that is brutishly axing the pensions of its members because of a supposed deficit, it screams of corruption and greed. After all, a pension fund is made up of the contributions of its members, and it is utterly amoral to increase Mr Galvin’s salary while expecting lecturers to pay more into the fund and get less out of it.
Additionally, unpacking the exert from the USS accounts, the annual £200,000 as part of the LTIP is incentivising Mr Galvin to pursue such extreme measures of drastically cutting pensions. In other words, the more lecturer pensions are cut, the more the fund can hold onto, and this will ensure Mr Galvin can claim £200,000 each year for three years, amounting to £600,000 on top of his already disgustingly high salary.
For those interested in an expert analysis of USS and their proposals, I encourage you to read Ewan McGaughey’s recent post for the London School of Economics and Political Science blog.