A bit more #defenduss blogging. Imperial College, that most monopoly-minded of schools, has come out against the USS valuation and the EPF proposals. And it’s come out swinging, too – check out the statement here.
We are disappointed that you appear to be focused on trying to fit your current proposed benefit solution to the perceived problem without first sufficiently challenging all the assumptions.
We are concerned that without this challenge you risk recommending a major downgrading of one of our employees’ most important benefits based on numbers which are as likely to be modelling artefacts as a reflection of the underlying economic reality.
SICKBURN.
As you will see in the attached paper, our simplified model includes additional cases to those presented in the USS paper, and those that have used the
actual salary increments and investment performance of the last decade show the model fund in surplus
OUCH. And the hits keep coming. Go read, and push it on anyone you can in UCU, university management, etc. They might meet us half way, after all.
As already remarked the big deal is that whoever fund the Universities want to cut higher education pay by 10-15%, and since even academics are short-termist idiots who only look at the after-tax cash put in their bank account every month, they have decided to cut the deferred pay that the short-termist idiots don’t “see”.
The docking of part of non-deferred pay in response to a partial strike was technically correct, but also a test of how much the short-termist idiots can stomach losing even a bit of their immediate cash flow.
The test succeeded! Whoever funds the Universities now knows the short-termist idiots have a phenomenally high discount rate (like the rest of the voters) and value a small amount of present cash flow far more than a large amount of future pension.
The famous Universities are in a bind: they are much richer than the others and could afford to setup a new USS with the same benefits as before, and leave the existing USS to provide much reduced benefits to the universities that whoever fund the universities want to let wither, but that would cost them extra in deferred pay (they already pay key staff a lot more than lower tier universities), as well as completely destroy the delusion that there is a unified job market for academics in the UK.
«value a small amount of present cash flow far more than a large amount of future pension.»
Probably whoever fund universities have read this article:
http://www.economist.com/blogs/buttonwood/2012/01/pensions
«Pensions You don’t know what you got, until you lose it»
«”Defined benefit pensions face the fundamental problem that the perceived benefit to employees is always likely to be less than the real cost to the employer, making them economically inefficient.”
Given the choice of a £40,000 salary, with no pension, and a £30,000 salary with a £10,000 pension contribution, employees will almost always choose the former»
«There is no evidence, for example, that employees react accordingly when they are switched into defined contribution schemes, where the employer pays in much less. What they should do is ramp up their personal contributions but they don’t.»
Always hoping to stiffen the resolve of any USS members that might be reading this…
«whoever fund the Universities want to cut higher education pay by 10-15%»
BTW to make explicit my suspicions, where is that coming from seems pretty obvious to me: the DfBIS has already cut a lot the grants to most universities, as “The Economist” issue 2014-11-29, says:
«For instance, the business department’s hefty 22% cut was aided by a huge reduction in the teaching grant to universities, as part of the coalition’s reforms to tuition fees»
For the next round of cuts at DfBIS (their budget is not “ring fenced”) a further increase in tuition fees to fund even lower direct funding of the university sector is not quite feasible.
So perhaps the goal is to cut the wage and benefits bill for University staff by substantially cutting their pensions thus achieving an “efficiency saving” 🙂 of around 10-15% of staff pay, and when that’s achieved the DfBIS will cut research and other grants accordingly as they will point out that labor costs have gone down proportionally.
What, you’re saying the government want’s to shrink universities?
«the government want’s to shrink universities»
I’ll take this as a serious question instead of a sarcastic one…
First the current government want to shrink “spending” a lot over the next few years:
http://www.bbc.co.uk/news/uk-politics-30323690
«public spending would fall from from £5,650 per head in 2009-10 to £3,880 in 2019-20.»
Since the spending on universities is not ring fenced, it would have to come down a lot more than proportionally.
Now nominally universities are chartered as independent corporations, so the government cannot shrink them *directly*; but whether they have to shrink or not depends a lot on how much of their funding that comes from the government shrinks or not. A lot of that funding is tied to the cost of an “FTE” that is total cost of employing an employee, so if the FTE cost goes down, the government fuding for research can shrink accordingly.
What the government probably does not want is to shrink student numbers, because that means higher reported unemployment; so shrinking staff costs is for them a better way to shrink funding.