Universities UK (UUK) has developed a contributions calculator to show how much Universities Superannuation Scheme (USS) members could be paying each month if employer-backed reforms currently under consultation are blocked by strike action.

USS Employers, a site owned and managed by UUK, warned that without the proposed changes, scheme members could face a 12 per cent rise in contributions from April 2022, followed by a further 17 per cent rise in October 2022.

UUK's calculator has suggested that a member earning £40,000, for instance, would therefore pay an additional £860 in pension contributions in 2022 for the same benefits, with contributions set to rise further every six months until 2025.

The USS trustee has stated that it would have to impose higher contributions from April 2022 if some form of benefit changes were not agreed to.

The UUK proposals were announced amid concerns over unaffordable contribution levels, and would see the salary cap for the scheme reduced from £60,000 a year to £40,000 a year, whilst indexation would be capped at 2.5 per cent a year, and members' pension accrual rate would reduce from 1/75th of salary to 1/85th of salary.

University and College Union (UCU), however, have warned that strike action could take place "before the end of the year", with 152 institutions being balloted on potential strike action over pension, pay and working condition concerns.

UCU had previously warned that strike action was "inevitable" after the proposals progressed to consultation, and has also launched its own modeller, which suggested that members could face a 35 per cent defined benefit (DB) cut.

Figures from the USS trustee have suggested that the proposed changes could reduce the amount of pension members receive at retirement by around 10-18 per cent, or 7-15 per cent when state pension is included.

Increases are not only a concern for members though, as USS Employers also warned that the rising contributions could have “huge implications” for the budgets of sponsoring employers of the scheme, which could result in money being diverted from other areas, such as staffing budgets and student services.

In particular, it estimated that the April 2022 contribution increases alone would cost employers an additional £206m per year, with the costs to then escalate higher every six months from October 2022.

This is despite employers having agreed to give even stronger backing to the scheme, estimated at £1.3 billion each year, and an offer of enhanced covenant support under the changes that would see employers paying in more than two and half times the average contribution rate for FTSE 100 companies.

USS Employers also stated that "many" of the 340 employers within USS are small charities, such as the Ewing Foundation, whose chief executive, Sarah Armstrong, warned that "it's so important that smaller organisations are considered in discussions over how to conclude this valuation".

"The financial implications of higher contributions are troubling – particularly for charities in the scheme like us, where resources are already very lean," she said.

Adding to this, Russell Group chief executive, Tim Bradshaw, commented: "Existing benefits that USS members have accrued are secure, but we need to make sure USS is sustainable for the long term.

“Making changes in contribution rates and future benefits is never easy, and only done when absolutely necessary, but the employer proposal means that a core DB element can be retained while keeping the scheme affordable for individuals and employers.

"I firmly believe that a combined contribution rate of around 30 per cent, along with the extra measures employers have agreed to, should be enough to deliver both a decent pension and the other valuable benefits that come with USS membership."

Brunel University London vice-chancellor, Professor Julia Buckingham, also warned that the "spectre of higher contributions" is causing a great deal of worry for university leaders.

“Staff have worked immensely hard through the extremely challenging conditions forced on us by the Covid-19 pandemic, and it would be an utter travesty if further pension contributions hikes led to more staff not joining the scheme because of the cost, a further exodus of current staff members from the scheme because they cannot afford to pay in more, and mass redundancies as employers have to cut back elsewhere to pay higher pension costs," she said.

“With so much financial uncertainty currently engulfing universities, and the significant financial pressures last year brought due to loss of commercial income and additional spending to make campuses Covid-secure and move teaching and support online, now is the time to shore up USS by making changes that guarantee good pension benefits without significant additional costs.”

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