Cambridge and Oxford in the USS pensions dispute
Number 13: #USSbriefs13
— corrections and clarifications to email@example.com
The Universities of Cambridge and Oxford, and their colleges and fellowships, have played a central role in the 2018 pensions dispute. College responses to an online survey run by UUK (Universities UK) were given undue weight. College bursars were used to amplify the Universities’ executive positions. Other college fellows, after initially being sidelined, have responded robustly in forcing their self-governing institutions to take a wider view on pensions. Colleges are starting to appreciate that ‘sectionalising’ our sector-wide pension scheme is a key step towards full marketisation of HE (Higher Education), and it should be resisted.
1. The UUK September survey and its consequences
In September 2017, UUK ran an online survey, using Survey Monkey, to canvass employers on the valuation of USS (the University Superannuation Scheme). In October, UUK summarised the view of employers to the USS trustees, noting that ‘a large minority of employers (42%) want to take less [investment] risk — including some of the very largest employers’ (for more on the politics of consultations in this dispute, see USSbriefs1). In November, USS trustees moved to a more cautious (‘de-risked’) valuation. That valuation led to a decision at the USS Joint Negotiating Committee to end the DB (Defined Benefit) pension scheme, which was carried by the casting vote of the Chair. The November valuation underpins the dismal DB offer negotiated at ACAS in March, which was rejected by UCU branches.
2. How did Oxbridge institutions inform UUK’s view?
Both Cambridge and Oxford Universities rejected the level of investment risk proposed by USS trustees in September, by answering to Question 3(a) that ‘My institution wants less risk to be taken, acknowledging the implications this might have for the benefits and/or costs’. The colleges of Oxbridge, which are counted by UUK as separate employers, made up ‘one third’ of the 42% of employers that rejected investment risk.
Nineteen colleges responded, with 12 from Cambridge, and 7 from Oxford. We now know that at least 16 of the 19 colleges followed their Universities by rejecting investment risk in Q3(a). Most college responses were returned by the college bursar without the full oversight of the governing body. UUK has confirmed that each college was counted by UUK with the same weight as a full University, even though most responses explicitly warned that the bursar’s view should not be mistaken for an authorised institutional view, and, the 68 Oxbridge colleges together employ fewer than 2% of active USS members.
3. Was there collusion in Oxbridge?
On 21 September 2017, Cambridge college bursars were sent an email recommending a survey response, with a ‘template’ attached. FoI (Freedom of Information) requests have subsequently revealed that several bursars submitted the template to UUK with little amendment. The template document, like the University’s response itself, was created by the University’s independent actuary, Mr J Seed, a director at Xafinity consulting. It was edited and sent out by the bursar of St Catharine’s college. Both men sit on the University’s Pensions Working Group (WG), which the latter co-chairs. The WG, which was set up by the University’s Finance Committee, also includes the CFO (Chief Financial Officer) of ‘Cambridge Group’ (Mr A Odgers, the former Deputy Chief Executive of UK Government Investments), as well as heads of finance, HR, administration and internal communications. It does not include any rank-and-file academics.
Similarly, Oxford set up a Pensions WG which excluded ordinary academics on the grounds of a perceived conflict of interest. The view of this WG was again amplified by college bursars. For example, the response of Pembroke College, Oxford, filed by its bursar, is almost word-for-word the same as the University’s response; other responses, such as those from Hertford and Brasenose colleges, follow the University’s outline in essence.
On 6th October, Oxbridge bursars and ‘HR Managers and/or College Accountants’ were invited to meet USS representatives at St Catharine’s college in Cambridge ‘to discuss sectionalisation’. The Cambridge survey response says ‘The University continues to lend its balance sheet to the sector […] allowing competitor universities access to investment financing or reducing their PPF [Pension Protection Fund] cost. […] The University has a strong preference […] for sectionalisation of both past and future service benefits and associated assets, with individual employers responsible for funding individual deficit amounts and future service benefits’. Oxbridge concerns were motivated, in part, by the ‘Last Man Standing’ rule in USS, which would increase liabilities if USS employers were to fall into bankruptcy. On 20th September, Oxbridge bursars discussed USS issues at the OxCam bursars’ meeting, with a written record noting that ‘Cambridge advised that Oxford and Cambridge should press for sectionalisation of the scheme […] moving to Defined Contributions would act as an effective sectionalisation’.
5. Leaving USS
It is expensive and difficult for a University to leave the Defined Benefit USS scheme. If all members agree, a University can ‘buy out’ its liabilities on a ‘section 75’ basis. By contrast, leaving a Defined Contribution scheme is more straightforward, as each individual has a ‘sectionalised’ pot. It is possible that, were the sector-wide scheme to be sectionalised, Cambridge and/or Oxford would have the means to set up a favourable local scheme preserving a DB element, thus retaining the ‘privilege’ of security in old age for their own staff after undermining it for the rest of the sector. The Cambridge Pensions WG minutes of 19th Jan 2018 record that, ‘Mr Seed confirmed that if the UUK [DC-only] proposal for USS was adopted he would provide an updated paper on the options for the University to continue to make DB pension provision for members of USS’.
6. Conflicts of interest
Members of the USS pension scheme in Oxbridge were excluded from decision-making on conflict-of-interest grounds. This argument was deployed both at University level, when constituting WGs, and at college level by bursars. But the same standards may not have been applied to other figures involved in the process. The ‘template’ survey responses in Cambridge were created by Mr Seed of Xafinity Consulting, a company which benefits financially from de-risking pension schemes. The Finance Committee, which established the Pension WG, is seeking around £600m in backing for developments in West and North West Cambridge. Ending the USS DB scheme may improve financing terms for the University by removing liabilities from its balance sheet (see also USSbriefs3).
7. The Fellowships fight back
University staff were dismayed by the news that bursars’ responses via Survey Monkey had been used by UUK to build a misleading prospectus for ending Defined Benefit. Perhaps less appreciated until recently is the role of the University-level Working Groups. Several colleges, via their governing bodies, have publicly reversed their former positions, and others that did not respond in September have now made their views known.
On 6th March, Oxford’s Congregation, having been denied a vote by 21 ‘blockers’, walked out of the Sheldonian Theatre and passed a resolution by over 400 votes to 2. The next day, Oxford’s VC Louise Richardson asked Oxford’s Council to reverse the University’s position. On 28th February, the Council of Regent House, the governing body of Cambridge University, received a Grace signed by 501 members, which instructed the University to accept the level of investment risk proposed by USS in September, and to offer a competitive Defined Benefit pension scheme. A full discussion followed on 20th March.
8. VCs: a change of heart or a change of tactics?
Recent weeks have seen emollient statements from Oxbridge VCs. For example, Cambridge VC Stephen Toope agrees with the Cambridge University Student Union (CUSU) President that strikes are ‘about the future of higher education, continued marketisation and the move towards students as consumers’. Yet, arguably, significant movement in the Universities’ positions has only been brought about by the self-governance steps detailed in (7) and the UCU action itself.
The role of high-level Working Groups in shaping and amplifying ‘the Oxbridge view’ (see 3–6) leads me to believe that there remains a significant weight behind the move to sectionalise the USS pension, at some point in the near future (see also Susanne Hakenbeck’s USSbriefs12). The marketisation agenda, now embodied in the Office for Students, will seek to break the sector up further into competing, atomised parts. A key step towards full marketisation is to break apart the sectoral pension. Other steps include ending sectoral settlements on pay and conditions, and removing caps on tuition fees and student numbers.
9. Final thoughts
The senior management of Oxbridge bear a heavy responsibility, along with UUK, for precipitating the pensions crisis of 2018. As first reported by Professor Mike Otsuka of LSE, an agenda for change was pushed through under the radar, using closed committees, hand-picked working groups and flawed surveys. It is time for senior figures in Oxbridge, UUK, and Government to take a wider view on the health of the sector. University staff have shown remarkable solidarity in standing up for the public university, the collaborative academy, and security in old age. It is time for VCs to follow their lead by pushing back, together, on misguided political attempts to run our Universities like businesses.
With thanks to Clément Mouhot and colleagues in the Cambridge UCU branch, Garrick Taylor and colleagues in the Oxford UCU branch, and to Mike Otsuka of LSE.
Update 19th April 2018
At the author’s request, three updates were made on 19th April 2018 to this brief. In section 9, the author added links to Mike Otsuka’s investigations into Oxbridge. In section 5, the author appended a sentence to the end of the paragraph. The author also added the Acknowledgements section.
This paper represents the views of the author only. The author believes all information to be reliable and accurate; if any errors are found please contact us so that we can correct them. We welcome discussion of the points raised and suggest that discussants use Twitter with the hashtag #USSbriefs13; the author will try to respond as appropriate. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.