Pensions at Goldsmiths Guide

Overview of the different staff pensions at Goldsmiths, including funding information, the challenges they face and forthcoming changes.

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Overview

The College’s starting point is that we fundamentally believe colleagues must be able to access good pensions.

  • The College currently invests £13million per year in staff pensions
  • £10million into the USS scheme – on average £9,865 for a full-time, permanent Goldsmiths employee who belongs to the scheme
  • £3million into the LPFA
  • Every 1% increase in USS costs the College £0.5million
  • Each increase is maintained so every year pension costs continue to rise steeply
  • 77% of Goldsmiths income comes from student fees

Goldsmiths believes a decent pension is an important part of our employment benefits and these include:

  • Average salary for a full-time, permanent Goldsmiths employee: £46,758
  • Up to 28 annual days’ leave every year, plus 6 closure days and Bank Holidays
  • Part of national pay agreements
  • At 3.9% our median gender pay gap is well below the sector average of 13.9% and we are working towards pay equality
  • Goldsmiths has committed to paying at least the London Living Wage since 2011
  • We provide free confidential, 24/7 access to a Staff Assistance Programme, Staff Counsellor and also offer a wide range of wellbeing support

Goldsmiths' current financial position

As set out in our Recovery information, the College is facing significant financial challenges which existed before the Covid-19 crisis and have been compounded by the pandemic which is estimated to have cost the College some £10 million.

Recent government proposals to reduce public funding by removing London weighting on the teaching grant and halving support for “high-cost” subjects like the creative arts also threaten to take away £2 million from the College from academic year 2021/22.

The College is delivering a Recovery Programme to address these serious challenges.

Pensions available at Goldsmiths

Goldsmiths offers two pension schemes to its eligible staff – the Universities Superannuation Scheme (USS) and the London Pensions Fund Authority (LPFA), which is a Local Government Pension Scheme (LGPS). Eligibility for each scheme depends on their job role and/or grade of their post – everyone has a pension at Goldsmiths which the College co-funds.

Eligible employees are automatically enrolled on the relevant scheme when they join the College with both employees and the College itself contributing to the pension schemes to provide an income when they have retired.

For many people, a pension is seen as deferred earnings on current work. The College recognises that this is an important issue and that a good pension is a key part of being rewarded for our colleagues’ work and their contribution to the institution.

We recognise that having a good pension is one of the most important benefits for our staff and so we are committed to providing the best support possible to our pension schemes. We currently pay in around £13 million a year to our employees’ pensions – £10 million into the USS and £3m into the LPFA, in addition to the contributions our colleagues make.

LPFA overview

The LPFA is the largest Local Government Pension provider in London.

It is responsible for the pension provision of around 19,489 employees, who are working for a not-for-profit, charity, private sector and local government employers, and around 35,541 pensioners, many of whom worked for the former  Greater London Council and the Inner London Education Authority.

At Goldsmiths the LPFA is for colleagues on Grade 5 and below with around 880 members of staff belonging to the LPFA. How much LPFA members pay into their pension depends on how much they earn, with a sliding scale of contributions outlined on lppapensions.co.uk. Goldsmiths pays in 17.3% of a person’s salary to LPFA pension scheme – in total this currently represents contributions of £3m.

See lpfa.org.uk for more about the LPFA.

USS overview

USS is the largest private pension scheme in the UK by assets and the main pension scheme for people working in higher education, with more 340 universities and other institutions belonging to the scheme. The USS has 205,000 active members of the scheme, 180,000 deferred members and 75,000 pensioner members.

The USS scheme is administered and managed by the USS Trustee and not by Goldsmiths – with the decisions made by the USS Trustees on issues like employer contribution levels having a significant local impact on the College. See uss.co.uk for the administration framework of the USS.

At Goldsmiths USS is for academics and professional services staff who are Grade 6 or over, with around 1,200 employees of Goldsmiths currently belonging to the scheme.

USS is one of the most generous private pension schemes available, with the average USS member receiving yearly pension payments of £19,000 a year compared to average payments of £7,000 a year for similar schemes.  

Some 89% of private defined benefit schemes in the UK have closed to new members with 48% no longer offering defined benefit at all. USS members now make up a fifth of the 1,089,000 people in the UK who are actively paying into a private defined benefit scheme.

Individual members and the College both pay into the USS pension. From 1 October 2021 employees will contribute 9.8% of their salary with Goldsmiths paying in 21.4% of an employee’s salary. 

The scheme has two parts.

  1. A defined benefit section that sees members build up a guaranteed retirement income based on the length of employment, how much they earn and what is called the accrual rate. The threshold for payments into the defined benefit section on salaries up to £59,833.65 for tax year 21/22
  2. A defined contribution section that sees contributions go into a savings pot which is then invested to provide a regular income. This applies on any earnings above the defined benefit threshold set out above

How USS is governed

The USS Trustee has the responsibility of ensuring the scheme is adequately funded, has an appropriate investment strategy and is well-run. It carries out valuations that are used to assess the financial health of the fund – depending on how the fund is performing the USS Trustee can call for rises in contributions or changes to the benefits.

The Joint Negotiating Committee, established under USS rules, is a panel of UCU and UUK representatives with an independent chair that is tasked with deciding how any change in the contribution rate to the pension scheme should be applied – whether by increasing the contributions of employers, scheme members or both, or changing the benefit structure to maintain contributions at their current rate.

Context of the changes to USS

The USS pension has been a challenging issue for some time for the higher education sector, with disagreements over it leading to a national dispute and industrial action. Some students have already been impacted by industrial action over pensions by UCU in 2018, 2019 and 2020.

HE policy website Wonkhe has published a broad timeline for the past four years which helps explain the situation.

While this is an incredibly complex issue, there are three principal parties with differing perspectives on the best way forward for USS. In simple terms:

  • The USS Trustees which administers the USS and which believes that the scheme has a funding gap of at least £15 billion and risks not being well enough funded to be able to continue paying current levels of benefits. They say either higher payments from members and universities, or a reduction in the benefits members earn, would ensure benefits could continue and also help pay off the deficit
  • University and College Union (UCU) and Goldsmiths UCU (GUCU – the local UCU branch), which is the primary trade union in higher education. They disagree (see ucu.org.uk/strikeforuss) with the USS valuation. UCU want to protect existing pension arrangements and do not think their members should pay any more for these benefits although they believe employers including Goldsmiths should pay more
  • Universities that belong to the USS are represented by Universities UK (UUK) which is the sector’s representative group. They say that universities are doing all they can to support staff pensions but warn that many institutions are at the limit of affordability due to pre-existing financial problems which have been compounded by the Covid-19 pandemic

Changes to USS

As with pensions in many other sectors, university pensions are currently facing significant challenges around affordability for members and whether they have enough funding to continue providing benefits for members at current levels.

There are a number of complex reasons for the rising costs of employee and employer pension contributions over time including how pension fund investments are performing with Covid-19, Brexit and other big economic factors playing a part. Additionally, there are societal causes such as the fact that people are now living for longer so are drawing their pensions for longer.

The USS pension scheme is run by the USS Trustees who are responsible for ensuring the scheme continues to be sustainable and viable.

Every three years, pensions law requires private pension schemes to undergo a valuation (see uss.co.uk). This is a financial healthcheck to ensure that the scheme has enough funding to remain viable and sustainable.

A valuation in 2018 saw the USS Trustee confirming that the USS scheme had a £3.6 billion deficit that legally needed to be addressed or risk action by The Pensions Regulator, the regulator for workplace pensions.

A plan was put into place to raise employee and employer contributions from 1 October 2021 – but these are not being implemented as a result of developments around a further valuation in 2020, which found that the gap in the scheme's funding had widened further to at least £15 billion. 

Responding to the 2020 valuation

Over summer 2021 discussions took place about how this gap could be addressed. A decision was taken by the Joint Negotiating Committee to proceed with proposals from Universities UK to make changes to the levels of benefits for those saving into the scheme.

These changes are set out on the USS website. They include a reduction in the threshold for earning defined benefit payments, from £59,600 to £40,000 and lowering the rate at which benefits are accrued. Benefits which have already been earned are guaranteed.

This option was chosen above those put forward by the USS Trustee which called for contributions to "rise sharply" up to 56.2% of salary, shared 65:35 between employer and employee. This proposal was unrealistic for individuals and employers, and would seen Goldsmiths contributing £18 million a year £18 million a year to USS pensions compared to £10 million a year now.

In a Letter to the Group Chief Executive Officer USS (PDF) the Warden set out Goldsmiths' firm opposition to these proposals.  

Goldsmiths' position on changes to the USS pension

As an employer, Goldsmiths believes colleagues should receive the best pension benefits the College can afford, with the College contributing some £13million to staff pensions including £10million to the USS.

Given the financial challenges facing our institution, this is the limit of affordability for us and as a result we have given qualified backing to the UUK changes – as well as support for an urgent review of the governance of USS.

Goldmiths submitted a response to the consulation over the future of the USS which was run by Universities UK in May 2021. 

As part of the consultation, the College ran a survey seeking the views on this matter of all colleagues who are eligible to belong to the USS. Some 76 colleagues participated in the survey, providing insight which informed the final submission to UUK.

Read the full response: USS consultation response 21 May 2021 (PDF) 

History of the USS negotiations

Over the last few years, actual changes and proposed changes to pensions have been an emotive issue with disputes leading to nationwide strike action. Across the country three periods of strike action have taken place at scores of universities over the last three years, including at Goldsmiths.

  • 14 days in Spring term 2018
  • 8 days in Autumn term 2019
  • 14 days in Spring term 2020

As part of efforts to find a shared way forward, a group made up of members drawn from UCU and UUK was set up in 2018. The group is called the Joint Expert Panel (JEP) - see ussjep.org.uk - and has made a number of recommendations to the USS Trustees through two reports. Goldsmiths’ responses to the first and second JEP reports are online:

In addition to the JEP a further dialogue has been ongoing through the Tripartite Group which has members from USS, UCU and UUK. Statements from the Tripartite Group meetings can be found at ussemployers.org.uk.

The issue of pensions in higher education has been flagged by the Institute for Financial Studies as one of the biggest financial challenges the sector faces. In their report “Will universities need a bailout to survive the Covid-19 crisis”, the IFS note:

“By far the largest source of financial risk is staff pensions. Reduced interest rates and depressed rates of return have significantly increased the expected cost of pension promises, further increasing the already large deficit on the main university pension scheme. New deficit figures for that scheme suggest the long-run cost to universities could be as high as £8 billion, double our previous central estimate of around £4 billion. The long-run cost to universities could be reduced by changes to the structure of the scheme or by significant increases in employee contributions.”