Universities UK (UUK) has proposed ending future accrual of defined benefit (DB) promises and transferring members to the existing defined contribution (DC) plan.
According to a statement published on UUK's website today, a "sustainable solution" for the funding challenges facing the Universities Superannuation Scheme (USS) needs to be found.
Employers want future benefits to be delivered by the USS Investment Builder section providing what UUK called a "market-leading DC scheme".
Under the current system, contributions on the first £55,550 of earnings go directly into the DB scheme, while anything above that goes into the DC plan.
UUK wants to abolish this threshold but said it is not shutting the DB scheme and if scheme funding improves at future valuations the opportunity to bring back DB accrual for future service is an option.
UUK said this would tackle the funding deficit and rising future costs, while ensuring it continues to offer attractive pensions benefits to members. As of 10 November, the acturial deficit was calculated by USS to be £7.5bn, with an 89% funding level.
The organisation's chief executive Alistair Jarvis explained the costs have become unsustainable.
"The costs of USS need to be controlled to ensure the scheme remains sustainable and secure for the long term. Change is needed to address the scheme's deficit and the rising cost of future pensions. Our proposals for reform will tackle the scheme's funding challenges so that universities can continue to offer attractive pensions benefits to staff," he said.
"Most universities can't afford to pay more into pensions without diverting money from other central areas, such as teaching or research, reducing their positive impact. Increasing contributions could damage the high standards that students, research funders and others rightly expect. It could even undermine the sustainability of some institutions.
"The option of no reform would be a dangerous gamble that employers are unwilling to take."
A USS spokesperson added: "Very low prospective returns across all asset classes have created very challenging circumstances for all pension providers. USS's primary duty is to ensure pensions already promised to its members are secure, and that pensions offered in future can be met with a high degree of confidence. Benefits members have earned to date are secure and protected in law."
University College Union general secretary Sally Hunt attacked the proposal.
"UUK have made a proposal to UCU which would mean the effective end of USS as we know it. It is the worst proposal I have received in 20 years of representing university staff and we need to fight it.
"UUK's proposal is that - apart from death and incapacity benefit - USS should now become what is called a fully DC scheme.
"In effect this means that your final pension is no longer guaranteed, but instead will be wholly dependent upon returns from the stock market on your 'investment'."
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