UCU members need to know what UUK will choose if they accept the proposal
Will UUK support the DB status quo or the 12 March ACAS proposal?
[Please see this update to the post below: “Q&A on the offer from UUK going out to ballot to UCU members”.]
1. Based on the information now available to me, which is more extensive than it was when I last posted, the following is my best estimate of what will happen if the UUK proposal on which UCU members will be balloted next week is accepted.
2. First, it is crucial for scheme members to recognise that, absent a swift presentation to it of “new material evidence”, USS will insist that its revised November valuation takes effect. I have come to this conclusion on the basis of two things: (a) the answers USS provided yesterday morning to the FT’s pensions correspondent, plus (b) my understanding that, in its most recent communication to USS (to which Sally Hunt refers in an email to members), the Pensions Regulator has indicated that they regard the November valuation as acceptable but the September valuation as unacceptable.
3. USS will not agree to delay its submission of the 2017 valuation for as long as it would take to constitute a joint expert panel and appoint a secretariat, and for the panel to then receive and analyse relevant evidence, review ‘the basis of the scheme valuation, assumptions and associated tests’, come to a majority decision, and deliver its report. Realistically, such a panel could only influence the next valuation. Not this one. For the reasons I spell out in this post, I remain convinced that the panel would serve a very useful role in shaping that valuation.
4. But there remains the pressing and unresolved question of what will happen to our benefits for this valuation.
5. USS will present JNC with the following three option:
(i) Do nothing, in which case the UUK 100% IDC JNC proposal approved by chair’s casting vote on 23 January would remain in effect and be sent out for 60-day member consultation.
(ii) Rescind the 23 January proposal and replace it with nothing, in which case the status quo of 1/75 CRB accrual up to £55.5k would remain in place (minus the 1% match) beyond April 2019, but contributions would increase by 10.6% overall (split 65%-35% employer-member) from that date. This is the scheme Rule 76.4 cost-sharing option.
(iii) Rescind the 23 January proposal and swiftly replace it with another benefit proposal, which conforms to November costings, which would then be sent out to 60-day member consultation. The most obvious replacement would be the ACAS-mediated 12 March agreement, of 1/85 DB accrual up to £42k, but with inflation revaluation only up to 2.5% CPI.
6. It is my understanding that both USS and tPR would find any of the above courses of action acceptable. So it is entirely up to JNC to decide what to do— by casting vote of the chair if UCU and UUK cannot come to joint agreement.
7. If UCU members are to be in a position to assess the merits of the balloted proposal, it is crucial for them to receive clarity from UUK regarding which of the above they would pursue.
8. The letter from Alistair Jarvis which Sally Hunt quotes in her email to members implies that UUK would not pursue option (i) if the balloted proposal is accepted. In other words, 100% IDC for this valuation would be taken off the table if the proposal is accepted. This implication is not ironclad, since Jarvis’s letter says that UUK “does not intend to return” to the 23 January proposal, and intentions can change. Such change of heart would, however, be inconsistent with Jarvis’s stated claim that UUK is “committed to maintaining a meaningful defined benefit pension offer at this valuation”. If UUK would like UCU members to accept the balloted proposal, it would be useful for Jarvis to confirm that his organisation is committed to taking the 23 January proposal off the table in this event.
9. Jarvis’s letter is also unclear as to whether UUK would also take 100% IDC off the table in the event that the proposal is rejected. Given the wording of his letter, his stated commitments might all be premised on the issuing of the report of the proposed joint expert panel. If, however, the proposal is rejected, the panel presumably would not be constituted. In order to know what is at stake if they vote to accept or reject the proposal, it would be useful for UUK to be less ambiguous as to whether they would try to send the 23 January proposal out to consultation if the current proposal is rejected.
10. Assuming that (i) is rejected in the event that UCU members accept the current proposal, the following crucial question arises: would JNC then embrace (ii) or (iii)?
11. Option (ii) would be best from the point of view of UCU members. This is because the default of an especially large rise in employer contributions in April 2019 in the absence of agreement on something else would provide UUK with strong incentive to reach an agreement acceptable to union members. Such default would also preserve the DB status quo, at least insofar as benefits are concerned, though not their cost.
12. Option (iii) would be much better from the perspective of employers, since a defaulting to the ACAS proposal would be much more affordable for them. It is, however, an option which UCU branch representatives overwhelmingly rejected. Hence, UCU members would not want to end up with what they were offered on the 12th of March.
13. As I read Jarvis’s letter, it seems clear to me that UUK will try to pursue option (iii), with chair’s casting vote at JNC, assuming that UCU remains opposed. This is because Jarvis commitment, in his letter, to maintaining “a meaningful defined benefit” employs precisely the same phrase that he used to characterise the ACAS proposal, whose UCU rejection he lamented.
14. It is vitally important that members receive clarity from UUK as to whether they will in fact pursue option (iii), thereby restoring the ACAS proposal that UCU so recently roundly rejected. If UUK instead makes clear that they will instead endorse the cost-sharing option (ii) as the default in the absence of agreement on something better, that would greatly reduce the odds that members will reject the proposal when it goes to ballot next week.
15. Personally, I will require clarity on this question before I will be in a position to state my own level of support for the current proposal. This is clarity UUK can and should provide, and before the ballot opens next week.