The JEP has secured a good result for USS members
On a record turnout of 63.5% of UCU members in April of last year, 64% voted to accept an offer to suspend strikes over USS and set up a Joint Expert Panel (JEP) which “will reflect the clear wish of staff to have a guaranteed pension comparable with current provision whilst meeting the affordability challenges for all parties, within the current regulatory framework”; 36% voted to reject that offer.
In September, the JEP issued a powerfully argued and widely-praised report which vindicated the position on the valuation that UCU and their actuary First Actuarial have been pressing for years. While it laid the groundwork for a more fundamental review and critique of USS’s valuation methodology, the primary objective of this initial report was more limited: to propose measures that would make it possible to preserve existing DB benefits at an affordable level in the near term, in order to make space for the more fundamental review.
Last summer, USS was claiming that the combined level of member and employer contributions would need to rise, in steps, from 26% to 36.6% of salaries by April 2020, in order to retain our current level of DB going forward. The JEP report proposed different pathways USS could take to bring the cost of preserving DB down to an affordable level of less than 30%.
Today, USS delivered a valuation that comes very close to < 30%: 30.7%. This rate would replace the current rate of 28.3% in October and would remain in place for two further years, until October 2021. At that point, the contribution level would be re-assessed in the light of a new valuation of the scheme as at March 2020 — which is when the scheme would have ordinarily been due for its next triennial valuation. Contributions would, however, be scheduled to rise to 34.7% in October 2021, unless the March 2020 valuation justifies a different level.
A welcome aspect of USS’s valuation is that it keeps our pensions affordable while foregoing the mechanism of contingent contributions (CCs) that would be automatically triggered by falls in the gilt yield or the value of the scheme assets. Any rise in contributions beyond the modest increase in October will be subject to a full and proper March 2020 valuation rather than being set off by the noise of short-term volatility in gilt yield and asset levels.
Moreover, a March 2020 valuation would provide the JEP with enough time to engage in a thorough review of USS’s valuation methodology, including their highly controversial Test 1. Because of time constraints, JEP needed, by contrast, to operate within the limits of USS’s existing valuation methodology in the report they issued in September.
Even while working within the confines of USS’s risk-averse valuation methodology, the JEP has managed to set us on the path to something far better than what anyone expected before they issued their report: a preservation of DB at its existing level, with no cuts, for about two and a half years, by means of a modest 0.8% rise in October in member contributions from their current 8.8% level — assuming that the overall rise to 30.7% is split 65:35 between employers and members in conformity with the cost-sharing formula.
The fruits the JEP has already borne give us reason to be confident that they will be able to help us secure something better for scheme members, once they are able to apply a thorough review of the scheme’s governance and valuation methodology in the next phase of their review. Crucially, there will be time between now and then for employers and the union to appoint scheme trustees who share the JEP’s approach to the valuation and that of the actuaries from the union (First Actuarial) and the employer (Aon) who have been advising the expert panel.
If we knew back in April 2018 what we now know about how much the JEP, UCU, and UUK would be able to achieve in such a short period of time, the proportion of members voting in favour of suspending further strikes to swiftly launch the JEP would surely have been even higher, by some margin, than the 64% who voted Yes.
Matt Waddup called this right; Jo Grady and Jo McNeill got this wrong
Of the three candidates who are standing for General Secretary, Matt Waddup was strongly in favour of voting Yes to suspend the strikes and set up the JEP:
The other two candidates — Jo Grady and Jo McNeill — were strongly opposed.
When the ballot opened, McNeill dismissed the offer to set up the JEP as “pretty meaningless”. To this day, she continues to maintain that it was a mistake to accept this offer, while failing to offer an account of what could have been achieved through further days of strikes in May or June.
Grady has written more extensively on the JEP offer. She wrote when the ballot opened that “I fundamentally believe that voting to accept now is an act of naivety.” She argued then that we should have threatened to remain on strike and enter a new phase of industrial action in order to get UUK to commit to things they ended up delivering in the absence of such industrial action:
“If we accept now, and negotiate without some key guarantees, we are very vulnerable to having a DC pension imposed upon us in the future. Rejecting now, with a threat of more industrial action in order to get a commitment to DB, is the only real option if we want to keep our DB pension. The objective of the next phase of industrial action would be to get the commitment from UUK. This might take the form of written commitments from UUK in less woolly language than that currently used, accompanied by an agreement to work with UCU in USS discussions.”
As I indicated in this blog that I posted in late March, the negotiators were right in coming to their contrary judgement that further strikes would not be needed to achieve these commitments. We had already advanced beyond that point.
A month later, Grady called for an election by and among the union membership of the union’s Joint Expert Panel members. This would have significantly delayed things and therefore have rendered it even more difficult for the JEP to report in time to keep the cost of our DB benefits from skyrocketing as the result of the 2017 valuation. More significantly, this call misconceived the purpose of the JEP, which was to appoint individuals whose views on DB valuation USS would be forced to take seriously on account of their expertise and standing and the quality of their judgement. It makes about as little sense to call for an election by the UCU membership of JEP members as it would to call for such election of UCU’s actuarial and legal advisors.
As UCU’s secretary to the JEP, Waddup fully understands how such a panel can be effective. His role involved interaction with the chair and technical advisors, supporting panellists, liaising with UUK, and providing advice about UCU’s position. Waddup was therefore centrally involved in efforts to protect our pensions by bringing the expertise of the joint UCU-UUK panel to bear on USS. It is highly significant that the final report was unanimous, while tilting strongly towards UCU’s views on the valuation. The JEP was an effective harvesting over the summer of the gains of the historic 14 days of strikes in the spring.
Glasgow UCU branch President Jeanette Findlay, who has endorsed Waddup, was the co-author, along with Patricia Findlay, of this compelling, sophisticated and well-judged case for voting Yes to setting up the JEP in April 2018. This remains the best analysis, either for or against, of that ballot offer. I urge you to compare Finlay’s case for Yes with Grady’s case for No which I discussed earlier.
Of course, the post of General Secretary is about far more than USS pensions. Nevertheless, this is the issue over which the next GS will be able to make more of a large and positive difference than on anything else. This is because UCU retains considerable formal powers of governance over USS, by means of appointments to the JNC and to the trustee board. The GS is therefore a far more direct player in the battle to preserve our USS pensions than over various other matters that have figured in the current election, such as those involving the Office for Students, the Department for Education, UK Research and Innovation, UCAS, the Home Office, the Treasury, or Parliament.
These next five years of the GS’s term of office will be an especially important period for the USS pension scheme. Fourteen historic days of strikes shifted employers from their plan to close the DB scheme down on grounds of unaffordability, all the way over to the conviction that they must join with the union in making the case for its sustainability at current levels. If you are among the 64% who voted Yes in April to set up the JEP, then you should vote for Waddup. If you are among the 36% who voted No but are now impressed that the JEP has secured our full DB pensions until the next valuation through a modest rise in contributions, then you should vote for Waddup. If, even given what you now know, you still regret that the union did not press on with further days of strikes rather than moving to set up the JEP in May, then you should vote for one of the other candidates. I think the union should be led by someone who recognises that the membership made the right decision in April in voting then to set up the JEP. So I will be casting my ballot for Matt Waddup and neither of the others.
[For further technical details, see “Q. How close has USS come to implementing JEP’s report in full?: A. Within a fraction of one percentage point”.]