Please reply to at least Q5 and Q6 of the USS consultation!
Express a preference for paying modestly higher contributions to retain current benefits until at least April 2023
I’m writing to urge all USS members to reply to the linked USS consultation, which closes at 5 pm this Monday the 17th of January. Check your inbox for an email from USS on Tuesday the 11th. This email contains your USS member number at the top, which you need in order to log in to the consultation.
There are eight questions. But you do not need to answer all of them. I encourage you to respond to at least Q5 and Q6 in order to express a preference for retaining current benefits over UUK’s cuts, for which I make what I regard as the “overwhelming” case in this blog post:
The overwhelming case for retaining current USS pension benefits until April 2023
The modest and affordable rise in contributions for 12 months is a small price to pay to avoid large cuts to pensions
If you’re convinced by the points I make in the post, please rank Option D (Contribution increases) first in response to Q5, which reads as follows:
This is my own more complete preference ordering, which you might simply copy and paste into your answer to Q5 if you find yourself in agreement:
First preference: D (Contribution increases)
Second preference: A (Reduction in salary threshold)
Third preference: B (Reduction in future accrual rate)
Fourth preference: C (Introduction of 2.5% cap)
My reasons for ranking the 2.5% inflation cap last should be clear from my blog, which includes graphs that vividly depict the detrimental effect of this cap over time.
As my blog indicates, the reduction in the salary threshold is worse than the reduction in the accrual rate for those earning £60k or higher, but the reduction in the accrual rate is worse for those earning £40k or less. My own ranking of A over B reflects a preference to protect the pensions of those less well paid.
Questions 1–3 pertain to cuts A-C. If you would like to answer those questions, you might want to draw on the considerations I mention above in ranking those three cuts.
Whether or not you answer questions 1–3, please make sure to answer Q6 (as well as Q5), which reads as follows:
Assuming that you’re convinced by the case I make in my blog post, here is some suggested wording to copy and paste, in response to Q6:
The fall-back position is clearly preferable until at least April 2023 to the cuts to pensions that employers are proposing. According to the consultation material, the stepped rises in contribution rates can be mitigated by increased employer covenant support. Especially if employers extend the same level of covenant support to current benefits as they’re offering on behalf of their own cuts, the modest rises in member contributions needed to retain current benefits until at least April 2023 are clearly preferable to the magnitude of the cuts to our pensions which such contributions would spare us. The consultation material also indicates that these stepped rises in contributions might be superseded by a new valuation. On any sensible new valuation of the financial health of the scheme, these rises would not need to continue beyond April 2023.
What follows is addressed to those members who are inclined not to engage directly with the consultation questions either (i) because you reject the premise of Q5 that the cost of benefits has increased or (ii) because you think your response will be ignored:
Some may be inclined to refuse to answer Q5 because you reject its underlying assumption that the 2020 valuation is sound and therefore either contributions must rise to retain current benefits or benefits must be cut. You have my sympathies. My posts on social media make clear that I regard the 2020 valuation as overly pessimistic.
Please, however, don’t refrain from answering Q5 on these grounds.
Instead make use of Q8 to express your view that there would be no increased cost to address, and hence no need for any benefit adjustment, so long as the scheme is valued appropriately.
It is, however, counterproductive to also refuse to answer Q5, for the following reasons:
We’re not being consulted on whether the valuation is sound and the cost of providing benefits has therefore gone up. Moreover, our refusal to engage with Q5 on grounds that the valuation is unsound will deprive members of one of the most effective means of resisting the employer cuts: namely, letting employers and USS know that you regard the cuts employers have proposed as worse than the contribution increases that would be necessary to preserve current benefits until April 2023.
Our preference for contribution increases versus benefit cuts is something members are explicitly being consulted on and which employers and USS will need to seriously consider. If members overwhelmingly express the view that an increase in contributions for 12 months is less bad than the imposition of UUK’s cuts, it will become difficult for employers to push through their cuts. They would, in fact, expose themselves to legal challenge if they tried to push through their cuts in spite of strong member preference for an increase in contributions over a cut to benefits.