Conditional Indexation
Vote Yes for motion HE16 at Sunday’s UCU HESC
I’d like to encourage UCU branch delegates at Sunday’s HESC conference to vote Yes for HE16 on conditional indexation (CI). It was proposed by the Sheffield branch and has the strong support of Sam Marsh.
1. The first thing to emphasize is that CI is proposed as a potential means of improving on, rather than restoring, the pre-2022 DB promise of 1/75th soft CPI cap accrual up to £60k:
“a. seeking accrual above 1/75th for affordable member contributions is in the interests of all USS members”
The full restoration of the pre-2022 DB promise is achievable without having to introduce CI.
2. Relevant to my first point, the motion describes CI as a “medium-term” rather than a short-term project. It would not be possible, in any event, to introduce CI as an element of the current 2023 valuation, while adhering to the timetable of full restoration of DB by 1 April 2024. And nobody is advocating the inclusion of CI in the consultation on the 2023 valuation.
3. The wording of the motion calls for “more detailed analysis and consultation in the medium-term on models of CI, with no pre-condition of ultimate acceptance”:
Conference therefore encourages UCU JNC negotiators’ engagement in preparations toward more detailed analysis and consultation in the medium-term on models of CI, with no pre-condition of ultimate acceptance.
Only someone who is not open minded to further analysis of this option to assess its potential should be opposed.
For my own part, I think CI holds most promise as a means of improving on the current soft CPI cap (i.e., full CPI revaluation up to 5% and 50% revaluation up to 15% CPI inflation) of the 1/75th accrual rate.
At the very least, it could provide a means of achieving full, uncapped CPI revaluation above the soft cap, when CPI inflation runs higher than 5%.
Going further, it could provide a means of achieving an upward revaluation of the accrual of active members beyond CPI, as in the case of TPS, whose active members’ CARE accrual is revalued by CPI+1.6% during each year leading up to retirement.
Something along lines of CPI+1.6% revaluation of accrual of USS members in the years leading up to retirement would have a number of benefits:
a. It would improve on the pre-2022 DB promise.
b. This improvement would mitigate the problem that younger members currently overpay for their DB promise, relative to older members. Younger members currently overpay for their DB promise because the soft cap CPI revaluation of that promise is less than the expected investment return on the contributions they pay for that promise.
c. Conditional revaluation only above the current CPI soft cap would get around the problem of rendering CI compliant with auto-enrolment requirements.
