Imperial pension fears over 'last man standing' clause

A university collapse could have dramatic impact on contributions, council told. John Morgan reports

十月 21, 2010

The collapse of universities under a new market-based system could have "dramatic consequences" for the sector's main pension fund, with fear of failures prompting one institution to rethink its membership.

The council of Imperial College London wants to "explore further" the option of offering alternative pensions to new staff instead of letting them enter the Universities Superannuation Scheme, the UK's second-largest private pension fund.

In minutes from a July council meeting, Martin Knight, a member of Imperial council, refers to a "residual risk relating to the nature of both major schemes (the USS and the Superannuation Arrangements of the University of London) as multi-member schemes."

Both are "last man standing" schemes. This means that if a university in the scheme fails, "its pension liabilities would have to be met by the remaining members...probably through increased contributions", the minutes say.

The minutes state that Lord Kerr, council chair, said that although offering alternative pension schemes to new staff, currently forbidden under USS rules, "could compromise the college's relationship with USS...he still believed this option should be explored further".

They add that council member Sir Peter Gershon agreed the college should "continue to review the options available to it, particularly given the 'last man standing' issue".

A college spokesman said: "Imperial will continue to offer the USS to eligible new members of staff."

The "last man standing" issue may have been sharpened by Lord Browne of Madingley's landmark report, published last week, which paves the way for a fees market in higher education and warns that "some institutions may be at risk of failing".

John Hanratty, head of public sector pensions at law firm Pinsent Masons, said failed institutions could pass on big bills. He referred to a small institution with only three active USS members, and a handful of deferred members working elsewhere, which had USS liabilities estimated at more than £3 million.

The USS is predominantly made up of staff in pre-1992 universities, less at risk of failure than post-1992 institutions.

But Mr Hanratty said staff movement within the sector meant "some senior people do have USS membership in post-92s".

He added: "If post-92s fail, then the pensions consequences will be dramatic - not only would the USS suffer, but also the Local Government Pension Scheme would have to pick up liabilities across local authorities."

Sally Hunt, University and College Union general secretary, called the Imperial council comments "scaremongering of the worst kind".

She said the "last man standing" structure made the USS "one of the most secure funds in the UK", warning that any institution pulling out of the scheme "will find it increasingly hard to retain their best staff".

A USS spokesman said its trustee board was "not aware of any university contemplating withdrawal from the scheme".

john.morgan@tsleducation.com.

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