We didn’t want to fill our newsletter with pension information, so here’s additional information beyond what’s in our February 2022 branch newsletter:
The 2.5% cap to reindexing of benefits has been temporarily deferred. Reindexing allows pensions to keep pace with inflation. Unfortunately, as one of the lead UCU pensions negotiators has noted, this deferral makes almost no difference to the size of the cuts. In a year like this, with inflation due to reach 7%, it’s not hard to see how this reindexing cap will very significantly erode the future value of pensions.
Any salary over £40k will now be pensioned into the USS Defined Contribution (DC, i.e., capital at risk) scheme and not the Definite Benefit (DB, i.e., guaranteed) scheme. USS Employers have misleadingly claimed that above this threshold staff will “receive a 20% contribution to their individual pension pots”. The reality is that USS Employers will contribute 10.2% to individual pension pots. Staff will contribute 9.8% of their salary. The ‘missing’ 11.4% effectively disappears into ‘deficit recovery’. Claims by USS Employers about contribution rates relative to FTSE 100 companies (which are in any case tenuous at best), are just false when it comes to salary over £40k.
It’s important members also realise that there is a 2.5% cap on inflation uprating of the £40k threshold, and that this cap has not been deferred. In years like this, it means that not only will staff be getting real-term pay-cuts, but that this pension threshold will be falling in real terms too. The only reason staff will not immediately see the effect of this change is because of the miserly sub-inflation, sub-2.5% pay offers that employers are making. If pay ever does pick up to match the rate of inflation, there is the potential for a greater and greater proportion of staff pensions moving into the riskier DC scheme over time.