Ministers urged to act on post-92 university pensions
Image: Janis Abolins - stock.adobe.com
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
The University and College Union has written to ministers to demand financial support for university pension contributions and sanctions for universities trying to water down pension provision. The letter comes after employer associations told MPs that changing a requirement for post-92 providers to participate in Teachers’ Pensions was a “top priority”.
Post-1992 universities are obliged by law to offer staff access to TPS, which has seen significant contribution hikes in recent years. With the sector currently in crisis, some providers are now moving staff to subsidiary companies with defined contribution arrangements.
UCU calls on ministers to act
The recent letter by UCU’s general secretary Jo Grady to education secretary Bridget Phillipson and skills minister Baroness Jacqui Smith is asking for “decisive action” to stop this happening. UCU wants the government to:
publicly rule out legislative changes that would permit sector-wide opt-outs from TPS;
“make clear to institutions pursuing fire-and-rehire tactics to remove TPS that such actions are unacceptable” and may incur sanctions from the Office for Students; and
develop an emergency financial package to support TPS contributions, comparable to that provided to schools and further education colleges.
Grady claimed that employers are using the current financial crisis in the higher education sector as “cover” to weaken pension benefits and said without intervention, the government risks looking complicit.
“If ministers are serious about treating higher education as a public good, they cannot stand by while employers strip away the retirement security, and steal the deferred wages, of staff. We need to see a clear government position: no opt-outs from TPS, no fire-and-rehire to cut pensions, and proper financial support to sustain the scheme,” she said.
She accused employer bodies Universities and Colleges Employers Association and Universities UK of “lobbying aggressively for the legal freedom to dismantle DB provision altogether”.
University employers lobby for pension flexibility
UCEA and UUK wrote to the chair of the Education Committee, Helen Hayes, last month saying that “there are actions which government can and should take” to support post-92 universities’ financial independence, with changes to the statutory obligations to participate in TPS being “our top priority in this regard”.
In January, UCEA published a position paper on ‘Financial stability in higher education: enabling a sustainable approach to pension provision’, arguing that the employer contribution rates to TPS are excessive and add to existing financial pressures on higher education.
The employer body’s chief executive, Raj Jethwa, said higher education institutions “are committed to offering high quality pensions but, at an employer contribution level of nearly 30%, the TPS fails to offer value for money. At a time when HE institutions face multiple financial challenges, a fair and sustainable approach to pensions is urgently needed.”
Last year, the Education Committee conducted an inquiry into higher education funding, where MPs heard that 50 mainly smaller or specialist higher education providers in England were at risk of closing down within two or three years.
Jethwa said post-92 universities are at a competitive disadvantage because of mandated TPS participation, where employer contributions are higher than in other schemes, adding: “UCEA has a duty to explore all the options available and will continue to lobby for urgent change.”
Last week, Jethwa also claimed that “UCU has not considered realistic alternatives to this beyond the recent request for financial subsidy”.
UCEA has been lobbying government since 2018 over TPS costs, including jointly with UCU over the SCAPE discount rate. The rate, which is used for public sector schemes, was reduced to CPI+1.7% in 2023, down from CPI+2.4%, pushing up scheme funding costs.
What is the issue?
Teachers’ Pension Scheme is a career average scheme accruing at 1/57th - compared with 1/75th in USS – and no salary cap, with members contributing between 7.4% and 12%.
Meanwhile, employer contribution rates to TPS went up to 28.68% on 1 April 2024, from previously 23.68% and 16.48% before that. In comparison, the employer contribution rate for USS is currently 14.5%.
The increase is being funded by the government for state schools and further education colleges, while post-92 universities and independent schools had to absorb the extra cost themselves. There has since been an exodus of independent schools, which have no statutory obligation to provide TPS.
Several post-92 universities are currently also looking to move away from TPS or the Local Government Pension Scheme. To this end, some are proposing to change contracts so that staff are employed through wholly owned subsidiaries, where they are enrolled in a DC scheme. This approach has been taken by a number of NHS trusts, but in the health sector, the government recently cracked down on the practice by limiting the creation of new hospital subsidiaries.
Strikes took place at Southampton Solent in February as 286 professional services employees were moved into a private company, losing access to the LGPS, while Northumbria University proposed to move about 1,200 academics out of TPS and into USS.
Now, staff at Sheffield Hallam are being balloted for strike action as the UCU says the university plans to employ existing teaching staff through a subsidiary, offering DC only. Research-contracted employees would have to move from TPS to the LGPS, according to the union, with only teaching staff with significant responsibility for research left in TPS.
Similarly, UCU met with London South Bank University managers last month after the university proposed, among others, to hire new starters through a subsidiary without access to TPS and threatened to put all academic roles at risk of redundancy. The union has said strike action is on the cards.
The Department for Education, the Treasury and the Department for Work and Pensions have been contacted for comment.
Should the government step in - and if so, what should this look like?
