Universities’ £10billion pension deficit may add £1,000 to student fee while lecturers could also have to increase contributions
- The Universities Superannuation Scheme is Britain’s biggest pension fund
- It has 303,000 members, most of them on gold-plated final salary pensions
- It puts its shortfall at £7.9bn but experts say the real deficit is £2.6bn higher
- To repair it would require a near doubling of contributions
When the news broke, the then Conservative Higher Education Minister, David Willetts told Newsnight:
“It would be wrong to pass on the cost of higher pensions to students. Universities are independent autonomous bodies and they know one of their financial responsibilities is to stand behind their pensions and tackle their deficits,’ he said. ‘It would be wrong to expect students to bail out pension deficits to support pension schemes that are far more generous than students are likely to enjoy when they’re older.”
The Universities Superannuation Scheme (USS) stated at the time of the Newsnight investigation that “The employers have made it clear there is no suggestion that tuition fees will be increased to provide additional funding for the scheme” and Nicola Dandridge, chief executive of Universities UK at that time, “denied that tuition fees will have to rise to plug the black hole”.
The articles when published prompted a great deal of ‘interesting’ commentary on social media sites, an example being:
“Most degree courses could be comfortable condensed into two years. Some canny students are monitoring contact time with their tutors, and lecturers and by the final year it is working out mighty expensive!.Two lectures a week in some cases plus very long holidays,(about 20 weeks) and the students are paying £9k for the privilege?”
Only 12 months ago the following was published:
“Bonuses up at USS as pension fund deficit grows by £1.8 billion”
“The annual report of the Universities Superannuation Scheme says that the shortfall between its assets and the value of pensions due to members was estimated to be £10 billion at the end of March, compared with £8.2 billion last year and predating any negative effect of the Brexit vote on pensions schemes.
Despite the expanding deficit, the annual report reveals that the value of bonuses paid to staff rocketed from £10.1 million to £18.2 million last year, with the vast bulk going to the scheme’s investment team.
This contributed to the number of USS employees earning more than £200,000 once salary and bonuses are combined increasing from 29 to 51 year-on-year.
Thirteen staff earned more than £500,000, up from three the year before. While the highest-paid employee in 2014-15 received between £900,000 and £950,000, last year one worker earned about £1.6 million, with another on about £1.4 million”.
In April of this year (2017) the financial Times reported that the deficit had risen to £17.5 billion and today (27/07/2107) the BBC published an article stating that University finances face £17.5bn pensions squeeze: http://www.bbc.com/news/uk-40763577. The article goes on to state that “To ensure the fund remains solvent, the USS will have to submit a plan to the pensions regulator to reduce the size of the deficit, which was first reported in The Financial Times”.
“That could mean cutting the value of future pay-outs, increasing staff contributions or raising employer contributions, putting pressure on university budgets”.
John Ralfe, an independent pensions consultant, said: “It seems inconceivable to me that student fees will not have to be diverted into plugging the pension deficit.
“That means either they go up or there is a smaller amount of money that can be dedicated to teaching and research. And obviously, the student fees that are paid are for teaching and research, not to pay for the folly of USS betting on equities over the last few years.”
There are alternative pathways to gaining a University Honours Degree significantly lower than the usual £9K per year university tuition fees and in some cases within 2 not 3 years of study. Please see the Qualifi pathways open to an alternative route: http://qualifi.net/university-pathways/