Southampton UCU Rotating Header Image

Pensions: are the proposed changes legal?

I have received an enquiry from a member asking whether it is legal for USS to make the employers’ proposed changes to our pension. There are two issues:

  1. Can they close the Final Salary scheme and force us into another one, and
  2. Can they change our existing accrued Final Salary benefits to salary at scheme closure inflated with CPI benefits?

The short, sad answer seems to be yes to both, provided the proper consultation and governance processes are followed. Here follows my non-lawyer attempt at a longer answer.

There is some general advice to scheme operators from Pinsents.

Note the important comments in the fourth paragraph:

Even though a scheme has been closed to future accrual, in some cases
members may still retain a link to final salary. This means that although
they do not build up future benefits in the scheme, the pension benefit they
will eventually receive will be based on their salary at the date they leave
employment with the employer rather than their salary at the date of the
scheme closure. Again, checking the scheme’s rules is extremely important.

As I read the USS scheme rules, rule 79 applies, which in turn invokes rules 14 and 15. That  means that, if the scheme is wound up, the mechanism in the employers’  proposal (salary at scheme closure plus CPI) will apply.

There is some interesting (and continuing) case law from IBM about changes to  their pensions schemes; it is analysed here and here.

In a nutshell, the only way to preserve our pensions is to persuade the employers to withdraw their proposals.

Denis Nicole

Leave a Reply

Your email address will not be published. Required fields are marked *