College Lecturer Discusses Why Academics Protest At Pension Cutbacks

College Lecturer Discusses Why Academics Protest At Pension Cutbacks

Staff At Universities Across The Uk Are Protesting Over Improvements To Their Pensions. Academics At 64 Universities, Who Are Members Of The University And College Union (ICU) And Who Are Signed Up To A Defined Benefit Pension Plan (known As Uss), Face Cutbacks That Will Leave Them Substantially Worse Off When They Retire.

Universities Uk, The Uk University Umbrella Organization That Oversees The Pension Plan, Says The Move Is Inevitable Because There Isn’t Enough Funding To Make The Plan Financially Viable. The Protesting Workers Denies That, And A Closer Look Reveals That This Has Meaning.

From The Outside, It May Look Like Another Case Of Another Uk Institution Hitting A Pension Black Hole Problem. In Recent Years Several Companies Have Made The Headlines For Pension Problems – Retailer Bhs, Construction Firm Carillion, Uk Steel Company Tata, Telecoms Giant Bt, Just To Name A Few.

Nevertheless, When It Comes To Pension Policy The Uk Is Even Worse Than Many Other Countries – And Has A Growing Pension Gap Across The Board.

Yet Between The Aforementioned Struggling Firms And The Colleges Whose Staff Is Striking, There Is A Major Gap. These Businesses All Suffered From Poor Results, While Universities Do Not. Bhs And Carillion Both Failed.

After The Financial Crisis Bt Has Been Having A Rough Ride. Its Sales Of Around £ 19bn In March 2016 Were Still Smaller Than Those Published In March 2009 (£ 21.7bn). Just £ 0.42 Per Share Was The Average Dividend Of Bt Over The Period 2010-16 Compared To £ 0.82 Per Share In 2009. Moreover, The £ 14 Billion Bt Pension Shortfall Came To Around 70% Of Its Overall Income.

The Deficit Issues

The Extent Of The Uss Deficit Is Not Quite Clear, By Comparison. Under Financial Accounting Standards Accounting Standards A Shortfall Of £ 17.5 Billion Is Estimated. Yet Uss Insists The Amount Is Incorrect And Its Real Debt Is £ 12.6bn.

The Discrepancies Come From The Way Death Rates Are Compensated For, Discounting Potential Liabilities And Value Properties. Calculations Of Deficit / Surplus Are Often Imprecise, As They Are Based On Projections Of Varying Return Levels Long Into The Future.

All We Do Know Is That The Total Income From The Universities Is Close To £ 35 Billion. Therefore, Their Pension Shortfall Is Around 36 Percent Of Income – Making It Look Much Less Of A Concern Than A Company Like Bt Is Facing.

Nevertheless, When It Comes To Accounting, It Is Fair To Assume That British Universities Have Been In Good Financial Shape Over The Last Decade Or So. However, In Recent Months, Vice-chancellors Have Emphasized How Effective They Have Been In Handling Their University Finances While Explaining Their High Salaries And Expenses.

According To The Higher Education Statistics Agency (here), British Universities ‘revenue From Tuition Fees Alone Has Increased By 14.2% Over The Past Two Years, While Staff-related Expenditures Have Risen By Just 3.6%. And The Surplus Of Total Revenue Over Total Expenditure In The 2016-17 Academic Year Was £ 1.2 Billion, Itself A More Than 40 Percent Improvement Over The Surplus Two Years Earlier, And Almost 10 Percent Of The Uss Calculation Of The Scheme’s Deficit.

Thus, The View Of Those On Strike – That The Underlying Economics And The Course Of Travel Mean That Their Universities Are In A Position To Expand Rather Than Close Their Pension Pot.

In Addition, In Recent Years The Uss Has Undergone A Number Of Changes Which Have Driven The Academics Out Of The Box. The Lower Cpi Inflation Index Substituted The Rpi Formula For How Pensions Were Measured (a Move Recently Rejected For Bt By The High Court). The Retirement Age Has Been Increased From 60 To 65, Which Will Increase Further To 68 By 2037. The Defined Benefit Scheme Was Now Limited To The First £ 55,000 In Income And Is Based On A Carer Average While It Used To Be Based On The Final Salary Of An Academic.

The Root Of The Conflict Between Universities And Employees Lies Moreover In The Fact That Universities Are Not Businesses With Shareholders, Who Have A Clear Say In How They Spend Money, Provided That They Own The Company. In Comparison, The Debate On Balancing Growth With The Treatment Of Employees Has Been Serious In The Universities. The Fact That Wages For Vcs Have Increased Considerably More Than Wages For Workers Adds To The Friction Between The Two Sides.

In This Sense, There Could Be A Potential Solution Keeping Worker Pensions As They Are And Waiting And Seeing For Now. The Size Of These Pension Liabilities Could Be Decreased Substantially In The Coming Years By Changing Market Conditions. Hence The Decision To Close Defined Benefit Funds At This Stage Could Be Premature, Considering That The Scheme Appears To Be Enough Cash To Keep The Current Situation Running For A Couple Of Years.