Legal action against university pension scheme wins first hearing

By Elizabeth McBride

Legal proceedings against the directors of the University Superannuation Scheme (USS), the main pension scheme for academic staff in UK higher education, have cleared their first hurdle.

Members of the University and College Union (UCU) are currently engaged in industrial action over changes to the USS, the main pension scheme for academic and senior academic-related staff in UK higher education.

Dr Ewan McGaughey, a member of King’s College London UCU, and Dr Neil Davies, from Bristol UCU, issued proceedings against the directors of USS in the UK High Court last October. A hearing on the 28th of February concluded that the claimants were acting in good faith. The claim is now to go to the next stage of the hearing. Here, it will be decided whether the claims should be fully pursued.

Both academics leading the case are members of the pension scheme and their legal action is crowdfunded. They are close to reaching their target of £200,000, with over 5000 donations so far.

Concerning the case, McGaughey and Davies claimed, “there’s over a £30bn surplus at USS, even if we went through 30 years of depression and war. (…) So all the Vice-Chancellors, all the Principals, all the Masters, who have told you they’re making ‘tough’ decisions, and that it’s ‘complex’, have been telling you nonsense.”

“Yes, we can win”

dr ewan mcgaughey and dr neil davies

“The proposed cuts would disproportionately harm women, young people and minorities – universities violate the Equality Act 2010 as well if they continue these cuts. USS costs inflated from £38m to £160m a year between 2007 and 2020, a stupendous level of squander.”

The pension changes include a lump sum pension, which the case argues will mean that women’s pensions are more likely to run out due to living longer than men. They also claim that pension contribution rises are discriminatory as they discourage those on the lowest pay from joining the scheme.

As well as violating the Equality Act their claim argues that the USS’s directors have breached their duties in three other ways: by failing to stop investment in fossil fuels; increasing operating costs, including executive pay; and conducting a valuation resulting in an undervaluation of the Scheme.

Stuart Weeks, a Durham professor, said that he supported the legal action. “The problems with our pensions have been caused by an increasingly over-prudent valuation of the USS schemes assets. 

“Employers, instead of backing us and confronting USS, have chosen to shift the burden to staff, and USS have colluded in this by effectively giving them a veto, which ties the hands of the trustees. Staff don’t think USS is acting in the interests of its own members, and without employer support, the courts are the only option.

“Like most of my colleagues, I’m very angry about the situation: the trustee system was set up for the protection of both employers and staff, and it’s been broken by all this.”

The two academics leading the proceedings described their motivations to Palatinate. “On the 1st of April, the pension will be cut by £100,000s for each and every university staff member in the UK, based on a pack of falsehoods, unless we succeed. 

“We know the value members place on ‘guaranteed’ pension outcomes and that any reduction in such guarantees is unwelcome”

Universities Superannuation Scheme

“Most of us will also be taking strike action. It’s essential to see that strike action, combined with legal action, is necessary with every other possible form of collective action to reverse the damage that those in control are doing to our higher education system. We need to picket, but it’s not enough to picket. We need to go to court, but it’s not enough to go to court. We need to put forward a positive, public vision of what a better higher education system looks like.

“Yes, we can win, because the judge has already said we have a “prima facie” case and the claimants are acting in “good faith”. We have huge obstacles to overcome because USS is going to throw thousands of pounds of your money at our action now.”

In a statement issued following last week’s hearing, USS said: “It is important to note that yesterday’s hearing was initiated by the claimants as part of the Court process for considering actions of this type and that, consistent with that process, USS was not involved in yesterday’s hearing.

“There was no significant consideration or endorsement by the judge of the underlying merits of the claim. USS will now oppose permission for the claim to proceed at the hearing.”

When the action was first raised in November the Scheme said, “Most of us who work at USS pay into the scheme too, so we know the value members place on ‘guaranteed’ pension outcomes and that any reduction in such guarantees is unwelcome.

“But those hard decisions have been made balancing the interests of all USS members (pensioners, dependants, members who have left but not yet taken their benefits, and active members), after extensive debate and with the benefit of appropriate expert advice.

“Our primary legal duty as Trustee is to protect the benefits promised to USS members. The JNC decides what benefits are provided, and how the contributions required to fund them are shared between members and employers.

Detailed analysis has confirmed that the price of promising a set, inflation-protected income for life in retirement – to be paid no matter what happens to the economy or HE sector in future – is much more expensive than in the past. That is as true for USS as it is for other defined benefit (DB) pension schemes.”


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