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UK academics begin legal action to halt proposed cuts to pensions

UK university academics have launched legal action to try to halt proposed cuts to their pensions as well as speed up their retirement scheme’s divestment of shares in fossil fuel companies.

Documents requesting permission to launch proceedings against the £80bn Universities Superannuation Scheme (USS), the UK’s largest private sector pension plan, were last week submitted to the High Court.

The crux of the move is a decision by the trustees and managers of the 430,000-member scheme to undertake a health check of the plan’s finances in March 2020, when markets were hit by the Covid-19 crisis — a move claimants argue could leave 200,000 active members a collective £31bn worse off in retirement.

The valuation identified a £14bn-£18bn shortfall in the scheme’s finances, which prompted proposals for fresh cuts to members’ retirement benefits to plug the deficit.

The claimants, two academics from Bristol university and King’s College London, argue the valuation did not need to take place in March last year.

“In March 2020 the world was hit by the Covid-19 pandemic, and there were significant falls in the value of assets,” said Neil Davies, an academic at Bristol, in legal documents submitted to the court.

“For example, non-UK developed world stock markets fell by 19 per cent in the 39 days prior to the valuation date.” 

“The control over how and when the 2020 valuation exercise was completed was entirely within the hands of the directors of the company (USS limited).” 

Davies said that by persisting with the March 2020 valuation, the scheme had not acted in the best interests its members.

“In doing so, the directors have ignored the experience of the scheme, whose assets have increased [since March 2020] by approximately £14.1bn to £80.6bn by March 2021.”

Modelling prepared by Davies, a senior research fellow at the Bristol Medical School specialising in statistical epidemiology, suggested pension cuts, proposed to make good the funding shortfall, would leave a USS member aged 44 and earning £44,700 around £156,000 worse off in retirement, compared with existing benefits.

“These changes will affect around 200,000 active scheme members . . . and in aggregate these changes could make active members worse off by £31bn.”

The claimants were also taking action against the USS for having “failed” to divest from fossil fuels.

In 2020, the USS announced an ambition to reach net zero by 2050, “if not before” and had previously said it aims to address “material” environmental, social and governance issues through engagement with the companies in which it invests.

“The scheme remains invested to a significant degree in fossil fuels, which risk significant financial detriment in the future, and have caused significant financial detriment to the interests of beneficiaries in recent years,” said Ewan McGaughey, a co-claimant and reader in law at King’s.

USS declined to comment on the High Court move.

The legal action is being funded by 1,500 university staff at higher education institutions across the UK who have contributed £50,000. It comes as the sector faces the prospect of a fresh round of industrial action over pension cuts and working conditions.

The University and College Union is balloting members on whether to take strike action over “four fights”, including pay and workloads, and pensions, setting the stage for further disruption after months in which face-to-face teaching was suspended because of the pandemic.

Jo Grady, UCU general secretary, last week wrote to Bill Galvin, USS chief executive, detailing legal “concerns” about the 2020 valuation.

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