Why USS pension cuts will not be spread equally
This brief explains why the proposed cuts to USS pensions will not be spread equally. Those who suffer discrimination in our society are more likely to be poorer in old age; and the proposed cuts will affect their pensions more adversely too. This includes women as well as people from groups defined as BAME (‘Black, Asian and Minority Ethnic’), disabled people and LGBT people.
1. There is a gender pension gap
The Chartered Insurance Institute has calculated that the average pension wealth of women in the UK by the age of 60–64 is one-quarter of the average amount held by men. And this gender pension gap has almost trebled in the last decade, according to The Actuary, the official magazine of the Institute and Faculty of Actuaries. Black and Asian pensioners are also at greater risk of living in poverty in the UK. It is likely that the proposed changes to the USS pension scheme will exacerbate existing intersecting inequalities related to gender, ethnicity, sexual orientation, gender identity, and disability.
2. Women earn less, on average, throughout their career
Women have a smaller pension than men in any system, because their career average salary will, on average, be lower. This is partly a consequence of gendered discrimination in the labour market (not just in universities, but in general).
- Women earn less than men for doing the same job (you can search find your own university’s data);
- women are more likely to work part-time;
- women are less likely to be promoted to senior positions than men; and
- women are more likely to be employed on fixed term contracts and other forms of casualised labour contracts.
Women are also more likely to leave the formal labour market to take up caring responsibilities for children and other relatives, which reduces both their income over the life course and their career progression. And when they do return to the labour market, they tend to take up part-time work. Similar patterns are observed for other groups that suffer discrimination in the labour market. We know that there is an ethnic pay gap that leaves BAME women with even lower salaries, and lower pension incomes. To make things worse, women’s life expectancy is longer than men’s and therefore women tend to rely on pensions for longer.
3. Pension systems do not recognise these inequalities
As argued by Jo Grady (2015), the UK pension system is ‘gender blind’: it ignores this gendered occupational life course, treats the experience of heterosexual men as the default when formulating pension policy, and recognises only paid employment as a way to accrue pension income.
4. Women are likely to be hardest hit by any movement towards a DC (Defined Contribution) pension system
The proposed changes to USS will shift members from a DB (Defined Benefit) to a DC (Defined Contribution) scheme. This shift transfers risk from the employer to the employee, with individual pension scheme members taking on more risk. Members of DC schemes are encouraged to make individual investment decisions regarding their own pensions. They are expected to act as ‘informed consumers’ and burdened with the risk and responsibility for assuring an adequate income in retirement. This is a complex and risky business for anyone, since pensions are influenced by factors outside an individual’s control, including stock market returns, interest rates and policy changes (Clark, Fiaschetti and Gerrans 2015; Price 2007; Price 2015).
But this is even worse for women and other groups with lower social status in our society. The individual responsibilisation that derives from the shift from a DB to a DC pensions scheme is not gender neutral. There is substantial evidence that women are more risk averse in investment decisions than men. Research conducted about the Australian university superannuation fund found that women made more conservative investment decisions and as a result received smaller pensions than men. As research from Foster and Heneghan shows, there is a gendered difference in how men and women engage with financial information. Pension knowledge and confidence in decision making are crucial dimensions.
Other reasons why women are likely to be hardest hit by any movement towards a DC pension system are explained in a blog by Martin Heneghan, Jo Grady and Liam Foster. These include the fact that DC pension schemes generally fail to offer the maternity coverage that DB schemes do. UUK have made no assurances that ours would be different in this respect.
USS, UUK and UCU have the potential to do something historic: to come together and work out how to design a fair pension that is not gender and ethnic blind, and that can act as a beacon for other schemes. As part of the ongoing negotiations, UCU should at the very least demand that an Equality Impact Assessment be conducted, by independent experts, for any proposed change to the USS pension scheme. This would investigate a range of factors such as, but not limited to, disability, sexual orientation, and gender identity. As far as we are aware, no equality assessment of any kind has been conducted yet.
Regardless of your position in the USS pension dispute, if you are concerned about the equality dimensions of proposed USS changes, please read and consider signing the Open Letter to the ECU and UK university leaders, accessible here.
This brief draws on research by Liam Foster, Jo Grady, Martin Heneghan and Debora Price. It also builds on the work carried out during the strike by the @USSAthenaSwan team including Gail Davies, Isabel Davis, Ian Gent, Jo Grady, Alexander Konovalov, Rebecca Leach, Siobhan McGrath. The good bits are from them. Any errors are mine.
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 #USSbriefs4; the author will try to respond as appropriate. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.