A simple means of ensuring that rates are capped at 25.2% and 9.8% from 1 April 2023

A formal mechanism to achieve UCU’s third proposal

The third of UCU’s three proposals on which employers are now consulting is as follows:

3. That employers agree to pay a maximum 25.2% and members a
maximum of 9.8% from 1 April 2023 so as to secure current benefits or, if
not possible, the best achievable….

UUK has raised the following objection:

It remains unclear how this employer contribution cap could be legally and formally achieved. …Without a legal guarantee, employers would be exposed to the higher contributions set out in the USS Trustee’s contributions schedule for this UCU proposal.

In response, this linked document from UCU provides the following means of ensuring that rates of 25.2% and 9.8% would take effect from April 2023:

…capped rates of 25.2% and 9.8% would remain in place from 1 April 2023.

The mechanism to ensure this would be implemented could be by means of a memorandum of understanding between UCU and UUK, as carried out by their JNC representatives.

In the event that USS costings of current benefits accrued from April 2023 cost greater than 35%, each of UCU and UUK will table proposals for a package of benefits that USS has costed at 35%, and will specify a member rate of 9.8% and an employer rate of 25.2%. If the two proposals differ, chair will decide between them by casting vote. If only one party tables such a proposal, the chair will enact it by casting vote.

This provides each party with assurance that it will be possible for them to ensure that contribution rates of 9.8% member, 25.2% employer, come into effect from April 2023.

This appears to be an elegant solution. It doesn’t matter whether the memorandum of understanding legally binds both UCU and UUK to do as instructed. UUK can unilaterally ensure, even in the absence of UCU’s adherence to this MoU, that rates of 25.2% and 9.8% will apply from April 2023. UUK can do so simply by tabling a proposal to that effect, which the chair will enact by casting vote.

One might worry whether one can be assured that the chair will cast their vote in conformity with the above instructions. To address this worry, UCU added the following:

If this is regarded as necessary, these instructions to the chair could be formalised by means of JNC resolution.

In case one remains worried whether a JNC resolution could so bind the chair, a pensions lawyer has proposed the following simple and elegant solution: replace “by means of JNC resolution” with “by means of amendment of the scheme rules”, so that the above sentence reads as follows:

If this is regarded as necessary, these instructions to the chair could be formalised by means of amendment of the scheme rules.

The above provides all the assurance UUK needs that it will be able to keep rates capped at 25.2% and 9.8% from April 2023.