Universities UK (UUK) has launched a consultation with sponsoring employers of the Universities Superannuation Scheme (USS) on a potential modification to its proposals on concluding the 2020 USS valuation.

Following a statutory consultation with affected members on the proposals, UUK revealed that the 2.5 per cent cap on inflationary increases to pension benefits was an issue “of the greatest concern” to members.

The cap would represent a reduction from the current limit, where the Consumer Price Index (CPI) is matched in full for the first 5 per cent, and 50 per cent of the excess over 5 per cent is paid, up to a maximum increase of 10 per cent.

In light of this, employers are now being asked whether they would support the deferral of the application of the cap, up to and including the contributions increases due in 2025.

This would mean that pension increases on new benefits accrued from 1 April 2022 would continue in line with the current approach to indexation up to and including the increase applied in April 2025.

Pension increases after April 2025 granted on all benefits accrued under the new structure would then be subject to the 2.5 per cent cap on increases, while benefits built up prior to 1 April 2022 would not be affected.

UUK acknowledged that the deferral would increase the required contribution rate by 0.3 per cent, although it clarified that this would come at no additional cost to scheme members.

Instead, this would be paid according the usual 65:35 cost-sharing formula, with employers paying 0.2 per cent, and the member share of 0.1 per cent being met through a modest extension to the recovery plan.

More broadly, the consultation found that views on member contribution rates are mixed, although many affected employees stating that 9.8 per cent of salary is at or near the limit of affordability.

It also highlighted the responses as indication that members would find it useful to see greater flexibility or optionality within the scheme to build their pension around life events, with support for members to enable them to make good decisions.

Responding to the proposed modification, UCU general secretary, Jo Grady, said: "It is deeply disappointing that at this crucial point, the best employers can offer is a temporary suspension of a cap on inflationary increases which, when lifted, would devastate the retirement benefits of thousands of scheme members. If this was an attempt to persuade UCU members not to take industrial action to protect their pensions, it will fail.

"Rather than rushing to consult on these insufficient proposals, UUK should be formally considering those put forward by UCU. UCU’s offer is the only serious, affordable compromise on the table that can protect pension benefits and avoid widespread disruption on campuses this month. UUK must now seek the opinions of vice chancellors. Failing that, vice chancellors must make their views known as a matter of urgency.

"Discussions with USS regarding UCU's proposals will conclude shortly. We therefore urge UUK to suspend this consultation and wait a few days so they can put our serious offer to institutions instead."

Around 68 universities are currently facing strike action later this month over proposed changes to the USS, after the University College Union (UCU) raised concerns that UUK's changes could represent a 35 per cent cut to members DB benefits.

UCU has instead called on employers to back its own proposals, which call for employer contribution rates to increase to 25.2 per cent and member rates to 9.8 per cent.

However, UUK has argued that these proposals don't appear "to be a serious attempt to reach agreement", emphasising that the level of employer contributions called for were "far beyond the mandate employers have given UUK".

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