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UK academics set to pay more into pension fund to plug gap

Academics face paying more to plug £8.4bn pension fund gap Contributions need to rise by nearly 4 percentage points, warns scheme’s provider. Members of the UK’s largest pension scheme will need to increase their contributions by nearly 4 percentage points to help plug its £8.4bn accounting deficit, unless they can come to an agreement with their employers, the Universities Superannuation Scheme warned this week. USS, which provides pensions for academics, said that if academics and universities did not strike a deal by the end of the year, both parties would need to increase their contributions from next April. Employees’ contributions would increase from current levels of 8 per cent of their salaries to 8.8 per cent next year and 11.7 per cent in 2020. Universities would increase their contributions from 18 to 19.5 per cent of payroll next year, rising to 22.4 per cent the following year. For months, UK universities have been locked in a bitter battle with their employees over the future of their generous “defined benefit” pensions, which the employers say are no longer affordable. In February, academics went on strike to fight plans to downgrade their pensions from final salary schemes, which come with guaranteed income on retirement, to defined contribution schemes, which are affected by the stock market. Bill Galvin, chief executive of USS, said the plans outlined on Wednesday were unlikely to be welcomed by members and employers, “as no one likes being asked for more money”. But he said that the changes were necessary because the “cost of pensions has increased”. The accounting deficit is not used to determine pension contributions but remains the subject of fierce dispute, as a large deficit calls into question future pension payments. USS has estimated that it still needs an extra £900m a year in contributions to keep pensions in their current shape. Independent pensions consultant John Ralfe said the new deficit figures did not “change the high cost and risk for universities” of guaranteeing generous defined benefit pensions.

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