UK universities have put forward proposals to close the Universities Superannuation Schemes (USS) £8bn deficit. These could see final salary benefits being closed to new members and a defined contribution element introduced for high earners.
Universities UK, the body representing universities in Britain, warned that the pension scheme was no longer affordable in its current form, arguing that 'reform is essential to address the deficit and the associated risk to the scheme to ensure it remains viable'.
There are two sections of the USS: the final salary section and the career revalued benefit (CRB) section.
Proposed changes include closing the final salary scheme for future service and stopping members from building up further benefit entitlements in this section.
For future service, all members of the USS will continue to receive defined benefits on the existing CRB scale of 1/80 of salary each year, plus tax-free cash of three times pension on their salary up to the proposed threshold of £50,000 a year provided that the cost is affordable for employers.
The factsheet, Employers' proposals for reform of USS said it was important to allow the highest number of USS members to accrue the 'whole or the majority of their benefits from the CRB section'.
It said: 'A proposed £50,000 salary threshold would mean that around two thirds of current members would receive a CRB pension on their whole salary.
'The remaining third would receive CRB benefits on salary up to the threshold with benefits on salary above that provided under the new defined contribution section.'
Member contributions of 6.5% and employer contributions of 12% of salary above the threshold would be invested in an individual account for each member with the proceeds available to provide benefits at retirement, Universities UK is proposing.
Anton Muscatelli, chair of Universities UK's Employers Pension Forum, said the proposed changes would deal with the massive deficit in the USS and mitigate the risk that contribution rates become unaffordable for both employees and employers.
He added: 'Any pensions already in payment or deferred in the scheme will not be affected at all by any of these changes, and past service accrued rights are protected by law.
'Whatever changes are eventually agreed, the employers will do everything they can to ensure that the USS remains an attractive and sustainable pension scheme for current and future members.'
The proposals will be subject to consultation with scheme members early next year. Any changes to the USS have to be agreed with trade unions before they can be implemented.