Universities are seeking a review of increased contribution rates proposed by UK higher education鈥檚 biggest pension fund and have expressed concerns about the role of The Pensions Regulator (TPR) in the process.

In a valuation report published on 3 March, the Universities Superannuation Scheme said that contributions from employers and staff would need to rise from the current 30.7 per cent of salaries to between 42.1 per cent and 56.2 per cent in order to protect benefits.

The announcement left the UK sector facing a fresh round of industrial unrest on pensions, following a series of strikes in recent years.

However, in a to the USS published on 10 March, Universities UK 鈥� which represents about 340 employers in the scheme 鈥� warns that the planned contribution rates 鈥渁re unaffordable for employers and will risk pricing even more staff out of the scheme鈥�.

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Requesting a formal review of the proposals, UUK says that the USS appears to take 鈥渧ery little account鈥� of evidence submitted by universities and unions, and expresses concern about the fund鈥檚 鈥渃lear implication that all employers need to do is to provide further covenant support, and that if employers do not provide this then employees need only blame employers鈥�.

鈥淭here is no clear justification for why the covenant requests have such a material impact on the contributions requested, and the scenarios seem staged to drive employers to provide even more additional support,鈥� the letter says.

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鈥淲e find this pitting of stakeholders against each other to be unhelpful and opportunistic given market conditions.鈥�

The letter adds that some of the USS鈥� decision-making 鈥渓ooks odd to employers鈥�, including the 鈥渆xtent of the influence鈥� of The Pensions Regulator on the process. 鈥淭he potential contribution levels being discussed in detail before Christmas were very different from those published following the period of intensive USS trustee discussions with TPR,鈥� the letter says.

鈥淭hese perceptions erode trust in the process and make agreement across the stakeholders harder to achieve.鈥�

In a to the regulator, UUK says it is 鈥渧ital鈥� that the regulator should 鈥渁llow the stakeholders enough space to find a solution 鈥� rather than imposing any hard constraints ahead of stakeholder discussions and consultation鈥�.

鈥淲e have seen little evidence to date that there is focus on your statutory objective of minimising any adverse impact on the sustainable growth of employers,鈥� UUK chief executive Alistair Jarvis tells Mike Birch, director of supervision at the regulator.

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鈥淚n particular, if the new pricing leads to widescale industrial action (as opposed to leaving room for a negotiated settlement), then the practical consequence of TPR鈥檚 input may well be seen to cause what we believe would be unnecessary damage to employers.鈥�

The UUK letter to USS adds that universities would be keen to discuss the possibility of reducing guaranteed defined benefit (DB) accrual, while maintaining the scheme鈥檚 hybrid structure, which also includes defined contribution payouts.

鈥淚t is our understanding that if the amount of DB risk building up over time were reduced, and hence less reliance on covenant (all else being equal) particularly over longer periods, this could suggest an alternative path where the level of prudence is adjusted to reflect the benefit change which would be implemented, making the costs more affordable to employers and members,鈥� the letter says.

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鈥淲e understand that the principle of such an approach would be supported by TPR. With some relaxation of assumptions, a solution would be more achievable that allows for current contributions and a continued hybrid benefit structure, supported by a package of additional covenant support, that would be both affordable and meaningful.鈥�

A USS spokeswoman reiterated that 鈥渕aterial changes to benefits and further covenant support from employers will need to be agreed if we are to avoid significant further increases in contributions, beyond levels the sector would find acceptable鈥�.

鈥淲e are highly sympathetic to the challenges facing our stakeholders, and we will work with them closely as they confront the decisions that need to be made,鈥� she said.

The deficit of the USS fund, which has about 400,000 active and retired members, is now estimated to stand at between 拢14.9聽billion and 拢17.9聽billion.

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chris.havergal@timeshighereducation.com