Feyzi Ismail interviews Dr Deepa Driver, one of the UCU's national negotiators on pensions, about the attacks on university workers’ pensions and how they can be resisted
Can you give us a background to USS and why those of us in pre-1992 universities are having to deal with attacks on our pensions again?
USS is an unusually strong scheme. First, at over £80bn, it’s one of the largest pension schemes in the world. It’s extremely secure because it’s a so-called ‘last-man-standing’ scheme: if one employer collapses, all the other employers in the scheme take on those liabilities. And this is within a sector that has withstood a global pandemic. It’s a sector which has a history going back a few hundred years with significant financial might. The idea that the largest HE employers in the UK will all collapse at the same time – which is an idea that USS is trying to promote – is laughable. It’s a tiny probability and if that kind of crisis happens, it won’t be pensions that we are worried about, is it? Second, it’s an immature scheme, which means the bulk of its liabilities haven’t accrued. It’s not likely that the scheme is in a position where it is forced to close, except perhaps through the charlatanism of those entrusted to care for it. And third, it’s an open scheme, which means new members can join, constantly refreshing the pool in the scheme.
All of this helps generations of HE employees and employers to benefit from mutuality, and prevents a dog-eat-dog approach from powerful employers. As members, everyone can move their pensions from one university to another without losing out. It also helps that the scheme offers many benefits that are really important even before you claim the pension. One example is the death-in-service benefit, which it actually turns out, is quite valuable for peace of mind during crises such as the Covid-19 pandemic.
Within a pensions landscape where the group-think is that defined benefit (DB) pensions are dying or dead, USS is unique in being a collective sector-wide scheme, being strong and viable, and it helps make clear that DB pensions can work. Most DB schemes are closed to new entrants – partly because many members of such schemes were tricked into giving up their solid DB pensions by the fantasy projections of deficits, which are far from reality. This is an industry where there is a dominance of the neoliberal logic that our old age should be subject to the vagaries of the market. Instead many in the industry have made vast amounts of money moving people out of good DB pensions and into the uncertain world of defined contribution (DC) pensions. Even the language employed in all of this is driven by neoliberal propaganda.
Most ordinary people will assume that a deficit means your incomings are lower than your outgoings – like in your own personal bank account. What people don’t always realise is that the term ‘deficit’ in pensions is nothing of the sort. Right now at USS, for example, the incomings in terms of member contributions and investment returns vastly exceed our outgoings in terms of benefits in payment. So the USS deficit isn’t a function of the reality in the here-and-now. Instead, ‘deficit’ is used to describe a projection. This projection is driven by assumptions within mathematical models that reflect the biases and the incentives of the people creating the models. These biases and misincentives can and do result in a misrepresentation of the existence and the size of any such deficit. Which is exactly how they are trying to close down the healthy USS scheme – one that’s actually grown in size from £66.5bn a few years ago at the last valuation to over £80bn in assets now.
These assumptions and incentives stem from the group-think I told you about. They can also stem from a belief that we shouldn’t be sharing risk between employers and employees, which is what a DB pensions scheme is about. They also stem from greed. HE employers have been trying for a number of years and in various ways to make money out of the scheme. And they did this about 20 years ago when they decided they would capitalise on a change in the accounting technique used in the scheme. To cut a long story short, they used this change to pretend the scheme was in a huge surplus. And as soon as there was a surplus, it allowed them to underpay into the scheme.
Over time, they have argued that there is a deficit and the scheme is unsustainable, and on this basis have tried to cut benefits. Why do they want to do this? They want to engage in cut-throat competition and run some institutions into the ground. They want to go into the open market and borrow to build some more edifices to management ego. Some more white elephants – that is, new shiny buildings and more dodgy investments at our students’ expense and at our expense, that end up in the closure of healthy departments and valuable faculties of study. These employers don’t care a jot about education. Their management cadres are stuffed with greedy, self-serving individuals who are plotting their next move up the greasy pole. To improve their little fiefdoms and bonuses they are willing to inflict the worst employment practices. So far, over the years this has resulted in stagnant pay, ruthless casualisation and widespread inequality while they win yet another Athena Swan or other award, and also various cuts to pensions – including changes to accrual and cuts to the final salary package we had. But many USS members can now see past the façade on USS.
What is happening now, therefore, is deeply connected to this broader landscape of exploitation and greed. Things came to a head in 2017 when the employers decided to focus on shifting the scheme towards a DC one, but most people realised that employers were conning them out of what was a very healthy pension, and they came out on strike in 2018. While most people don’t think about their pensions until they come to retirement, they have understood or are in the process of understanding that shared risk between employers and employees is a good thing compared to taking on risk as individual employees, or even as a collective of individuals, which is called a Collective Defined Contribution or CDC.
What is the controversy over the valuation of the scheme now and what can we do about it?
When we had the strike in 2018, the employers said they understood the valuation of the scheme was flawed. They would work with UCU to revamp the scheme in terms of governance and the valuation. But the reality of what they signed up to was very wishy-washy. A Joint Expert Panel, with UCU and UUK nominees, was appointed. In my opinion, although these people were clever experts and capable in themselves, it is really unhelpful to members that our union stood down a successful strike on the basis of vague assurances. It is simply lazy negotiation to rely on an expert panel who cannot even instruct the USS trustee to do anything. And remember, what the USS trustee did was basically ignore many of the substantive points the JEP made. It’s also deluded to expect members’ interests to be protected by a group of experts (half of whom are appointed by employers), when the group isn’t democratically accountable to us.
The JEP fortunately agreed with us in the first phase. Then in its second phase, in my opinion, it suggested some shoddy and vacuous reforms to resolve the issues it had found. What we have got in the 3 years since the establishment of the JEP is pitifully weak. Yes, we’ve had expert vindication of our position that the USS valuation imposed on us was flawed. But so what? If you follow that with wishy-washy recommendations for governance and other reforms, that do nothing to actually change the board and the executive of USS, it amounts to nothing but hot air. But it’s not time to throw in the towel. In fact, UCU have made some substantial progress. As a result of the 2018 action and the subsequent scrutiny from members, UCU negotiators have pushed the employer to properly examine the valuation. And voila, even the employers’ own actuary has acknowledged that the valuation methodology is flawed.
While employers have moved from their earlier recalcitrant and evidence-free position on a huge deficit, employers have done little concretely to join us in taking action to correct this misrepresentation. In 2017 and 2018, the employers insisted that they disagreed with our concerns over the fundamental flaws with the mathematics of the valuation. But now even they know full-well that USS have imposed an out-of-cycle valuation at the worst point in the pandemic i.e. 31 March 2020. You don’t have to be an expert to see that using a point in the pandemic when the sector’s future was unclear, and the financial markets were going haywire, isn’t going to present a realistic projection of the health of the scheme.
Employers are now weaponising this spurious valuation and the artificial timeline to fall in line with USS’ pretence of a deficit. Then they say they have to engage in ‘benefits reform’. Benefits reform is of course a euphemism for large and unjustified cuts to our pension. And all this is happening when the scheme has grown by almost £20bn, despite the pandemic. Isn’t that an absolute nonsense? We mustn’t be taken in. Our union can be weak and work within the terms of the 2020 valuation. Or we can voice our disagreement with this valuation and take concrete steps, including legal and political action, to force them to change the date of the valuation, as other pension schemes have done. Although USS assures us that nothing would really change because they have looked at post-valuation experience and made adjustments, it would change the result. We need to argue for more sound assumptions within the model for valuing the scheme, which are not recklessly conservative to the point that they make a healthy scheme look seriously ill. Such changes would involve a clear recognition that our scheme is different to other DB schemes that are single-employer and that our scheme operates in a sector that hasn’t gone bankrupt and where the possibility of the sector closing down is laughable. Of course, in any sector, you will have institutions that are more or less weak compared to others but the way the USS scheme has worked in order to bring employers together has made a big difference to saving HE.
The union also needs to go on the offensive in terms of defending our pensions. Let me just give you one example of where we can lose a lot if we aren’t careful. In the case of casualised and low-paid staff, employers were trying to create divisions by proposing what they termed a low-cost option. Sounds good right? What this supposedly low-cost solution would result in, though, is a low-benefit solution for our lowest paid colleagues. As negotiators, we cannot walk into such traps that encourage us to create a two-tier scheme. They try to present this using fancy words. But we aren’t stupid and we aren’t weak. We beat back those suggestions. We must similarly beat back the employers’ proposal of benefits reform. It’s a nonsense and its completely and utterly unjustified when the scheme is in such good health. We have got to stop them from trying scheming tricks that will impoverish us in old age.
I urge members to stay strong, and support the legal action. We can negotiate to have a reasonable pension, but we are also likely to have to take industrial action to ensure a revised 2021 valuation that has reasonable assumptions. For those who are worried about the financial costs to members from such action, let me remind you of the hundreds of thousands each of us stands to lose if the reforms are allowed. Our union is receiving member fees for a reason: to run campaigns and advocate for outcomes that are in our interest and to pay strike pay when we have to take action. It’s important that we use our subs towards what’s best for members when we most need it.
Can you say something more about what we need to do in terms of the governance of the scheme? How to push for reforms?
There are a number of important things we can do to help change the scheme. First and foremost, it’s important that all members – and I mean USS members not just UCU members – start talking to each other about the attack on us. We have some of the most brilliant minds in our sector – let’s use them to ensure we are protected from unjustified cuts. Second, it’s important we support the legal actions to hold the trustee – and potentially The Pensions Regulator (TPR) – to account. In doing so we must recognise that legal action is not just about being in court – it’s also about interim steps, covering all our bases and striking fear in the hearts of those getting paid our money to rob us of our own pensions.
Some time ago USS did something very clever and nasty, unfortunately and shamefully supported by some of the former UCU-nominated directors of the recent past. To summarise, they used a regulatory edict to quickly change USS from being a scheme where we could have control over who sits on the USS board, to something called a Master Trust, and they did so in a way which prevents us from recalling or replacing our directors when we think they aren’t doing enough to look after the interests of our members. TPR’s push for professional trustees has created a situation where industry group-think now predominates on our board. If you look at the kinds of people on our board, many of them work for fossil fuel companies, large investment banks, securities firms, and the kinds of consultancy firms that are interested in ripping off DB pension funds in order to turn them into DC schemes. So it is really important that we support the various steps to change the board of directors and increase the level of member representation on the board, so such hare-brained attempts to change our contributions to over 50% of our salaries don’t see the light of day ever again.
These member representatives should not just be appointed by UCU through a rather opaque process but should actually be elected by members from amongst those who are participating in the scheme. This would ensure that there are trustworthy people on the board. And they should be afraid that they will be recalled if they don’t protect our interests. Recently, we have really suffered from having people on the USS Board who have agreed to things that are hugely detrimental to members. The USS chief executive Bill Galvin is making several hundred thousand pounds a year plus bonuses for excellent performance, and then he and his executive have the gall to argue that the scheme is not in good shape. And remember when world-renowned expert and statistician Professor Jane Hutton – a UCU-nominated trustee – called them out, what did they do? They fired her and used an opaque process to cover up their misconduct in doing so. This is outrageous. The USS executive and its board work for us. They cannot take us for a ride like this.
To ensure our negotiations are well-run, we need to elect people with the courage to stand by members. Not just highfalutin talk, but the real courage it takes to push back when members’ interests could be harmed. We have to make sure that JNC members and our branch officers – all lay-elected reps – get the time to be able to do justice to the work involved in advocating our interests. Our union should be ensuring that negotiators like me have facility time – I’ve had none for USS work for the past two years – because as anyone can imagine it’s really hard to balance this alongside the culture of overwork for the day job.
Some years ago there were proposals from branches for USS to move away from stock market investment and towards more socially useful ventures. Is this a viable option?
In an £80bn scheme, this is not something that you can argue is unviable. Let me give you an example of how we can engage in economically productive and socially just investments. USS created a myth they called ‘de-risking’, which is actually completely counter to decreasing risk. They are moving our assets from reasonable return-seeking equities to gilts and other bond market instruments, arguing that bond market returns are more certain and are therefore easier to predict in terms of what the situation will be in say 30 years’ time. But as a result of this craze for certainty, they are actually moving away from investing in productive equities i.e. what our economy and society need for productive business activity. Yes, the process is increasing certainty, but this is an increased certainty that the scheme won’t be able to generate the returns to pay pensions in 30 years’ time.
To call this de-risking because it increases this superficial sense of certainty is nonsense – it’s actually increasing the risk of the scheme. TPR loves the idea of certainty because it is unduly paranoid about any pension fund going under and relying on the public purse. But USS isn’t going to go under, because it’s a multi-employer, sector-wide scheme. Evidence suggests that encouraging pension schemes like USS to do this spurious de-risking is fuelling a global debt bubble by encouraging more pension schemes to invest in debt instruments, which actually creates an artificial demand-driven bubble for these debt instruments when there isn’t enough yield. That bubble will burst and the pension scheme members will be the ones who pay the costs of the TPR’s nonsense approach. We need to be aware of these dangers and argue they must be avoided.
Similarly, what does the move towards increasing contributions right now do to a healthy scheme such as ours? Although it may be said to make the scheme look more secure because more money is being paid into the scheme, actually it encourages employers and members to leave the scheme because it’s too expensive. This then causes the scheme to be more unstable and weaker in the medium to long-term. All these kinds of counterintuitive measures should be stamped on right away. Rather, if we want to be more socially responsible and have more ethical investment, we have to think about whether USS needs to invest in Heathrow, or Thames Water or companies that are ripping off ordinary people in order to enrich a small number of very wealthy shareholders. Ethical investments don’t lose us money. In fact, well-governed and ethical investments can perform really well.
Is there divided opinion between UCU negotiators over how to progress an effective response?
I think within any union you will have different points of view. One set of responses to employers’ attacks, which I ascribe to, has been to say that we are going to take a stand on this kind of nonsense and we are going to beat them back once and for all. This point of view recognises that negotiation is strongest when you have members mobilised and ready. It comes from the view that any solution within the scope of the 2020 valuation, which was hugely flawed in itself, makes us accept some of the falsehoods in the employers’ narrative and in USS’s narrative. Which means that it becomes a very small range of options within which to negotiate.
A natural question to wonder about is how long will we have to strike for, if we do strike. Well, remember, an industrial action ballot isn’t the same as taking industrial action. Negotiating positions change quickly when members’ might is revealed. That said, we don’t answer a ballot without being clear we will take action when needed. So how long will it take if we do strike? As Liverpool’s recent action has shown, we can beat back employers and it’s not easy but it builds the union in a way nothing else can. Any industrial action is successful when you last one day longer than the employer can bear. But we are also cognisant of the disruption this causes to our students and we don’t want to have to take this action. So we have to be powerful in a way that makes sure employers don’t come after our pensions again, and that when we take action it is strong and decisive. This cannot be resolved by half-hearted solutions. We have to make sure this sorts the problems in a comprehensive and thorough way, and that means serious changes to governance and to the valuation methodology. We have to make sure the employers know we mean business. When we do that, we win.
The other point of view within the union is the one which worries that we cannot mobilise, and perhaps thinks that when we mobilise we must meet somewhere in the middle between employers’ unreasonable position and our own. This view also wants to come across as reasonable to employers and to the outside world. I have some sympathy with appearing reasonable. The idea behind being reasonable in this way is to offer solutions in which we take some pain ourselves but which would also cause pain for employers. And if employers reject this, then that puts us in a position where we then resort to strike action. I see the logic behind this approach, and I will seriously engage with it, as long as it comes from a position of good faith. However, I think it is misguided. What worries me with this second position is that there is a disproportionate faith in negotiation, without getting members behind the negotiators. More worryingly, by proposing solutions within the parameters the employer has set, this view runs the very real risk that when members are being asked to take strike action, it’s to achieve very little. Why? Because this reasonable position is not that much better than the employers’ worst position. Why would members trust a union that sells them out?
No, we don’t take strike action lightly. Many of us find it very hard, whether it’s in terms of our commitment to our students, or in terms of the costs to us – and I mean a range of costs, not just financial. Many of us are conscious that the employers have been able to spin a narrative that we should be grateful that we have a DB scheme when few others do. And I think those who ascribe to the second view above seem to be very ashamed to call members out on strike.
There is also the problem of being in a sector where people do a lot of intellectual work. And I don’t just mean academics but a range of our members who engage in debate in an intellectualised, sanitised environment. There is a tendency to believe that if our arguments are sharp enough and if we write a sharply worded petition or letter, things will work out. But there is a difference between having an intellectual understanding of something and being able to mobilise and take industrial action and politically organise around something that hurts employers. You cannot mistake one for the other.
I’m also deeply concerned that this attitude that we have to be pragmatic and reasonable is always thrust upon members, when actually employers are being extremely aggressive. We must remember that the employers are being hugely unreasonable and unethical. Just look at the evidence. Employers in their most recent wave of PR are currently using a paid influencer to tell our younger members that what our members want is flexibility. Of course, our younger members know what the ‘flexibility’ of casualisation and low pay is like. And it’s not just younger members who are on these contracts. It’s people throughout their career, who have had 15 or 20 years of casualised contracts, who have never been able to have a home because they are moving from place to place etc. This is unacceptable and must be fought against. You don’t fight this by negotiating within the employers’ preferred envelope.
The other big debate is whether we should merge the four fights dispute – over pay, equality, casualisation and workload – with the USS dispute. Because of course one of the advantages of merging the issues is that you can bring in the whole HE sector, with pre-1992s and post-1992s working together and recognising some of the issues that HE has as a whole. Our union could do some very interesting things. We could have mobilised, had HEC done what we had asked them to very clearly at the recent Higher Education Sector Conference (HESC) – and this is the thing that bothers me – which was unequivocally to call a ballot over industrial action, so our negotiators are playing with a strong hand. Instead, the current HEC decided to ignore that and toy with interpreting wording, so now the HESC is only taking place in September, which makes it more difficult to mobilise the whole sector compared to doing so in July or August, to be ready for the start of term. A start of term mobilisation is particularly important during a time of Covid when everybody is using blended learning because employers now have a whole range of options where they can use recorded lectures etc. to strike break. And to put ourselves in that position is very short-sighted and undemocratic, let’s not kid ourselves. But let’s also not forget that members are very angry – with the disgusting 0% pay offer made last year, with what we have sacrificed in order to do what is right for our institutions and our students and with the number of our colleagues who have lost casualised contracts or have been made voluntarily or compulsorily redundant. And all this at a time when senior managers continue to be paid well and the sector as a whole has done so well in terms of student income despite the pandemic.
Members can see through the employers’ hollow arguments and we must help all USS members understand the realities of the situation so that so we can have the largest mobilisation possible for this USS dispute. This is a question of strength and political will in our union. Our union leadership must stand by members and we must not allow any trivialisation of our democratic will. That’s why internal elections at our union count. We must not be impressed by grandiose words but rather look at how people vote on issues that matter to members.
What is the leadership strategy for dealing with the pensions issue and action more generally?
HEC received a very clear mandate from the HESC earlier this year. So they need to execute that mandate. UCU officials have made progress in encouraging TPR to finally meet with us. In the last several years, incidentally, we have only met with them three times, which means the regulator was not listening to members in any meaningful way. UCU should have mobilised on this earlier. But giving credit where it’s due, UCU has done well in finally making a breakthrough there.
But apart from that, I’m really concerned about the way in which the leadership of our union is engaging with the pensions dispute. What our union needs to be better at is making members well aware that the employers are running a dishonest PR campaign. UCU could do much more to explain to members what’s really going on with the scheme. Members have a general idea but they need to have specific campaigning material if we are intending to do what the HESC said, which is to take industrial action in the autumn term. More needs to be done to get the UCU membership and all the USS members we represent to clearly understand the key headline points about how they are trying to steal our valuable pensions.
Second, I think the UCU leadership needs to commit to democracy. Undermining the democracy of the sector conference by not calling a ballot and by playing around with the dates of the upcoming sector conference was a regressive step. If we want to win this battle, we as members must not allow such behaviour to be repeated. We have to be wary of a Keir Starmer-like approach of platitudes, wretched actual behaviour and the beating up of the left at every turn. I won’t say much more about specific factions because we have to be careful about how we relate to and talk about each other when we are all struggling after a hard year during this pandemic. We want our union members and all USS members to trust UCU and its leadership and negotiators to faithfully represent members’ interests.
What is the role of UUK in this dispute and do you sense any divisions amongst the VCs?
UUK has started making noises about them not being the right people to negotiate on pensions. And they have also been indicating that UCU shouldn’t be representing members, which is quite a cheek because they seem to think that there might be other ways of negotiating pensions, which is very dangerous for all of us. But the other thing that UUK have done is ramp up their PR strategy. If you look at some of the resources on the UUK website for employers, you will see the quality of consulting work which is helping them to push messages that are completely untrue. There was actually a discussion around whether life expectancy had increased because of Covid. This is the kind of nonsense they are putting out and that some people no doubt are being conned by. We should be doing more to challenge the UCU leadership on this, but also to educate our members about how healthy our pensions are and how many hundreds of thousands of pounds each member is likely to lose by reforms to the scheme. And these reforms are always negative. They are not making them because they want to be good to employees. They are making them because they are seeing another opportunity to use the surplus that is building up in USS to their own ends, pretending that it is a deficit. This is closely linked to the way universities are selling off land, and building shiny new buildings in order to manipulate rankings. They want to get USS liabilities off their balance sheets so that they can engage in more foolhardy schemes that are detrimental to both members and students. So it’s something we must resist if we care about pensions, or even education.
How likely are we to see industrial action before Xmas?
I think industrial action is inevitable because any solution that is proposed by UCU, which is within the ambit of the 2020 valuation, will not be acceptable to members. Our members shouldn’t have to put up with this kind of charlatanism.
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Feyzi Ismail teaches at Goldsmiths, University of London, and is active in UCU
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