The fight over USS pensions and the role of the so-called ‘independent’ pensions regulator

Yet again, university employers (UUK) and the University and College Union (UCU) are at loggerheads over the future of the sector’s USS pension scheme. Interestingly, the ‘independent’ Pensions Regulator (TPR) has increasingly assumed a rather hawkish position deepening further the alarmist and reckless policies of USS managers. In this blog post, I will reflect on why TPR adopts such an interventionist position. 

This is not a new story. Valuation after valuation, USS fund managers have predicted large deficits in view of future obligations to members and demanded cuts to benefits and/or increased contribution payments by universities and staff. Despite the heavy criticism of having conducted the valuation on 31 March 2020 at the hight of the Coronavirus pandemic and of adopting a highly pessimistic and heavily contested valuation method (see Sam March, national UCU negotiator), this time too USS holds firm in its demands for cuts or increased contribution payments. The assessed funding gap of between £14.9bn to £17.9bn as of 31 March 2020 would require an increase in contribution rates from currently 30.7 per cent to at least 42.1 per cent if not even 49.6 per cent (USS, 3 March 2021). 

These are contribution figures, neither staff nor universities can afford. Instead of continuing, however, with UCU the joint contestation of the flawed valuation method, UUK has put forward its own proposals (UUK, 15 June 2021), which signify drastic cuts for members such as a reduction of the defined benefits (DB) salary threshold from £60k to £40k (see UCU Nottingham University, 19 July 2021).

The request for cuts in benefits by employers is nothing new. In 2018, UUK wanted to abolish the defined benefit element of USS completely. What is new, however, is the increasing intervention by the ‘independent’ Pensions Regulator (TPR) in support of the pessimistic fund valuation and demands for cuts (see, for example, The Pension Regulator, 26 February 2021; FT, 10 March 2021; Pensions Age, 16 June 2021). Why would the regulator abandon its ‘independent’ position and interfere directly? 

At first sight, this is clearly surprising. Would it not be normal that the fund partners UUK and UCU representing employers and staff respectively are given space to sort out their differences and find a viable way forward including the method of how the fund is valuated? Nevertheless, what appears at first sight surprising, is much less so when analysed at depth. Within capitalist political economies, assuming the independence of regulators or other institutions such as the Bank of England fetishizes their existence and rationale. It completely fails to comprehend their role within concrete capitalist accumulation. To understand their function, we need to go beyond the fetishized appearance and look at the way the capitalist social relations of production are organized. 

Rather than pursuing an independent role, these institutions are crucial in sustaining the continuation of capitalist accumulation. And it is here, where the interests of USS fund managers, TPR and university employers ultimately overlap. Against the background of increased competition in Higher Education and losses resulting from the pandemic, there is a fundamental shift towards reducing employers’ costs and risks associated with pensions. For years now, there has been increasing pressure towards a defined contributions scheme, in which employees shoulder all the risks. The imposition of such a system failed in 2018 on the strength of industrial action by UCU members. The recent proposed cuts, while still retaining a defined benefits element for now, are a further step towards the ultimate goal of a fully defined contributions scheme. 

And it is not just Higher Education, where employers try to cut costs and reduce risks. For some time, defined benefits pension schemes have come under pressure and are increasingly phased out across the economy. There is a general agreement by employers and state institutions that defined benefits pension schemes are no longer affordable. USS is one of the last schemes, which at least includes a defined benefits element. It is therefore an obstacle not only to University employers, but the British economy as a whole and it is here that TPR comes into play. Pushing USS towards a defined contributions scheme is important for the overall organisation of the (neoliberal) capitalist social relations of production. 

In turn, this implies that the resistance by UCU and staff in Higher Education is not only of importance to the sector. It is part of the much wider struggle between capital and labour over how the costs of the pandemic are to be divided in society. There are already pronouncements by the government about the future need of raining in public spending. These are only the first steps of ensuring that it is yet again working people who pay for the crisis as they have done back in 2008 and subsequent austerity policies. The attack on USS pensions is just part of it.

Andreas Bieler

Professor of Political Economy

University of Nottingham/UK

Andreas.Bieler@nottingham.ac.uk

Personal website: http://andreasbieler.net

2 August 2021