Cuts to UK sector pensions proposed by vice-chancellors could slash the retirement income of university staff by thousands of pounds annually, a union has warned.

The University and College Union said that reforms currently under consideration for the Universities Superannuation Scheme could reduce employees¡¯ guaranteed retirement benefits by as much as 35 per cent.

UCU general secretary Jo Grady claimed that the pension cuts proposed by Universities UK would ¡°pull the rug from under people¡¯s retirement¡±.

The union has refused to rule out industrial action over the reforms, following several walkouts over pensions in recent years.

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But UUK accused the union of only telling ¡°part of the story¡±, highlighting that staff would need to pay tens of thousands of pounds more into their pensions to protect existing benefits.

The USS scheme has a hybrid structure, with defined benefits ¨C which offer a guaranteed amount of pension ¨C accrued on earnings up to a salary threshold, currently set at just under ?60,000. Twenty per cent of earnings above that threshold is invested into a defined contribution scheme, under which incomes are tied to stock market performance.

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UUK has proposed reducing the threshold for the defined benefit cut-off to ?40,000 and changing the accrual rate ¨C the proportion of earnings received as a pension for each year in the scheme ¨C to 1/85th of salary, instead of 1/75th of salary.

USS has indicated that these benefits could be provided ¨C if certain other assurances were made ¨C on a combined contribution rate from employers and employees of 34.7 per cent of salary.

The contribution rate is currently set at 30.7 per cent and USS has indicated that, to protect current benefits, contributions would need to rise to between 42.1 per cent and 56.2 per cent.

But UCU said that its modelling tool, released on 28 May, showed that under UUK¡¯s proposals a typical USS member aged 37 and earning ?41,526 ¨C the current starting salary for many lecturers ¨C would build up an annual guaranteed pension of ?12,170 if they continued to work full-time in the sector until age 66.

This compares to ?18,857 under current benefits ¨C a 35 per cent cut, which would also apply to the guaranteed cash lump sum?that members receive on retirement.

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¡°Reducing the level and the security of benefits will pull the rug from under people¡¯s retirement and threaten the viability of the entire scheme as people question why they should remain a part of it,¡± said Dr Grady.

She warned that UUK¡¯s proposals would ¡°further cement a two-tier workforce¡± by having a particularly significant impact on staff at the start of their careers, who are more likely to be on low pay and casualised contracts, and are unlikely to have already banked significant pension pots.

¡°The answer to concerns about the scheme¡¯s affordability is for vice-chancellors to show the same faith in higher education that their staff do ¨C and to listen to the experts who say the scheme is sustainable,¡± Dr Grady said. ¡°Increased guarantees from employers on staying within the scheme must be matched with a concerted effort to push back on bogus claims that defined benefits are unaffordable.¡±

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UUK said that the typical reduction in benefits for a staff member earning ?40,000 would actually be about 12 per cent, since benefits earned prior to the change would be unaffected. To keep current benefits, the typical USS member would need to pay in at least ?1,660 more annually, it said.

UUK suggested that staff could earn the same pension amount by working longer ¨C about four years longer for someone starting their career at age 25 and earning ?40,000.

¡°Staff need to decide if they want to pay much more ¨C tens of thousands of pounds over a lifetime ¨C to maintain benefits or continue to pay the same rate and accept moderate benefit change, which UUK has proposed,¡± UUK said.

¡°UCU should also be honest with USS members about the severe implications ¨C including job losses ¨C of employers paying much higher contributions.¡±

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UCU has said it would support reforms that would allow lower-paid staff to pay lower contributions, so long as their retirement benefits remained secure. The union has also said that it would be prepared to explore an approach known as ¡°conditional benefits¡±, under which guaranteed payouts would still accrue but they would only increase in line with inflation if the scheme continued to perform well financially.

chris.havergal@timeshighereducation.com