24 October 2018
Concerns raised in UCEA's recent pensions briefing explain the serious impact of recently announced employer contribution increases on universities obliged to use public service pension schemes. HM Treasury has suggested that additional funding will be available from government departments to assist with mitigating this significantly increased financial burden in 2019-20. However, announcements made in recent weeks indicate that universities could be excluded from receiving any such additional funding. With less than 12 months' notice given to employers to manage how they will meet this unexpected increase in employer costs*, universities foresee a detrimental impact on both students and staff as inevitable.
Recent Ministerial statements** regarding government funding to assist employers in 2019-20 in meeting these additional and unexpected costs have not included a confirmation that universities are included at all. In addition to requesting that universities are included in any additional funds that are provided to employers to mitigate increases in employer contributions, UCEA is calling for the Treasury to pause the valuation process in order to allow the Government Actuary's Department (GAD) to undertake an urgent review.
The Briefing sets out the likely financial impact to the sector of these unprecedented increases in employer contribution rates to the Teachers' Pension Scheme (TPS), which is the principal pension scheme for the circa 43,000 UK academic staff in the post-1992 or 'modern' universities. The proposed contribution hikes are due to take effect in less than a year (from September 2019 in England and Wales; April 2019 in Scotland). Employers using TPS in England and Wales will be expected to pay an extra 7.2 percentage points of salaries in contributions to TPS, taking the overall contribution rate from 16.48% to 23.68% - a 44% rise.
It is vital to secure the long-term financial sustainability of our universities, all of which have a demonstrable economic and wider impact in the UK. The TPS contribution increase in England and Wales alone is estimated to involve additional costs to the affected universities of c.£130 million per annum from September 2019 - the equivalent of taking the fees paid each year by 14,000 undergraduate students in England and spending that entire fee income solely on pension contributions. UCEA estimates the annual additional cost to universities in Scotland to be around £8m each year (a 30% increase), to be borne largely across eight universities. Universities delivering essential medical education to train our health professionals of the future will also be hit by unprecedented increases - around 6 percentage points - in the contributions required of them to the NHS Pension Scheme.
The proposed employer contribution increases will without doubt have a detrimental impact on these universities' ability to enhance student experience and promote the economic wellbeing of their cities and regions at what is already a time of great uncertainty. As a result, both employers and trade unions across all the public sector schemes are urging the Treasury to reconsider.
*Public service pensions 2016 valuations: supplementary documents
Recent Ministerial statements** regarding government funding to assist employers in 2019-20 in meeting these additional and unexpected costs have not included a confirmation that universities are included at all. In addition to requesting that universities are included in any additional funds that are provided to employers to mitigate increases in employer contributions, UCEA is calling for the Treasury to pause the valuation process in order to allow the Government Actuary's Department (GAD) to undertake an urgent review.
The Briefing sets out the likely financial impact to the sector of these unprecedented increases in employer contribution rates to the Teachers' Pension Scheme (TPS), which is the principal pension scheme for the circa 43,000 UK academic staff in the post-1992 or 'modern' universities. The proposed contribution hikes are due to take effect in less than a year (from September 2019 in England and Wales; April 2019 in Scotland). Employers using TPS in England and Wales will be expected to pay an extra 7.2 percentage points of salaries in contributions to TPS, taking the overall contribution rate from 16.48% to 23.68% - a 44% rise.
It is vital to secure the long-term financial sustainability of our universities, all of which have a demonstrable economic and wider impact in the UK. The TPS contribution increase in England and Wales alone is estimated to involve additional costs to the affected universities of c.£130 million per annum from September 2019 - the equivalent of taking the fees paid each year by 14,000 undergraduate students in England and spending that entire fee income solely on pension contributions. UCEA estimates the annual additional cost to universities in Scotland to be around £8m each year (a 30% increase), to be borne largely across eight universities. Universities delivering essential medical education to train our health professionals of the future will also be hit by unprecedented increases - around 6 percentage points - in the contributions required of them to the NHS Pension Scheme.
The proposed employer contribution increases will without doubt have a detrimental impact on these universities' ability to enhance student experience and promote the economic wellbeing of their cities and regions at what is already a time of great uncertainty. As a result, both employers and trade unions across all the public sector schemes are urging the Treasury to reconsider.
*Public service pensions 2016 valuations: supplementary documents
**In the Commons on Monday 15 October, the DfE Minister Nick Gibb advised Angela Raynor the Shadow Minister that:
“The Department intends to fund state-funded schools and further education providers for these costs for financial year 2019-20 and will be consulting to understand the effects on other sectors. Funding from 2020-21 onwards will be considered as part of the next Spending Review."
ENDS
For further information: Please contact Andy Fryer, Head of Communications and Membership (a.fryer@ucea.ac.uk) or Marc Whittaker, Communications and Events Manager (m.whittaker@ucea.ac.uk). Call 020 7383 2444.
For further information: Please contact Andy Fryer, Head of Communications and Membership (a.fryer@ucea.ac.uk) or Marc Whittaker, Communications and Events Manager (m.whittaker@ucea.ac.uk). Call 020 7383 2444.
Notes to editors
Universities are a vital part of the UK economy, generating more than £95 billion a year in output for the British economy and indirectly supporting 944,000 jobs at all skill levels.
UCEA's 'Politician and stakeholder briefing on the impact of the recently announced contribution increases for university employers using public service pension schemes' is available to download. This briefing describes the significant consequences, for their staff and students, for the post-92 or 'modern' universities obliged to offer the public service pension schemes and lists our requests of HM Treasury.
In order to prevent damage to universities and students, UCEA is calling on the Treasury to defer the cost increases while it fully reviews the 2016 valuation and adjustment of the discount rate. It is also calling on the Government to be more flexible around the cost cap process and to provide guarantees around making funding available to employers in HE to deal with the unexpected additional costs from this latest Treasury announcement.
Active pensions scheme members in UK HE:
In order to prevent damage to universities and students, UCEA is calling on the Treasury to defer the cost increases while it fully reviews the 2016 valuation and adjustment of the discount rate. It is also calling on the Government to be more flexible around the cost cap process and to provide guarantees around making funding available to employers in HE to deal with the unexpected additional costs from this latest Treasury announcement.
Active pensions scheme members in UK HE:
TPS - 43,000 (England and Wales, Scotland)
LGPS - 51,000 (England and Wales, Scotland)
NHSPS - 7,000
USS - 198,000
