University criticised for creating uncertainty for pension scheme members

Martin Shipton

Cardiff University has been accused of causing worry to some of its longest serving employees with a proposal to save money by changing their pension arrangements.

A consultation document sent to 22 professional services staff revealed the university’s intention to stop contributing to their existing pension scheme – the Local Government Pension Scheme (LGPS) – and instead enrol them in a university scheme, which for historical reasons they have not joined.

The consultation document makes it clear that the university’s motive in proposing the change is to save money.

‘Financial health’

It states: “The university believes that implementing the proposed change is important for its financial health … The current pension arrangement with the LGPS presents a number of challenges. Membership of the LGPS was from an historic merger, and there are currently only 22 university employees remaining.”

Employees who joined the university more recently were enrolled in the university’s own pension scheme.

The document continues: “ … If there are no members accruing benefits in the LGPS, the university will effectively have ‘exited’ the scheme. This exit could occur naturally when the last active member leaves or retires, or it could be initiated by altering future pension provisions for those in the LGPS.

“Upon exit, the Cardiff and Vale Pension Fund will assess whether sufficient funds are available to cover all past benefits accrued by university staff, as no further contributions will be made. This assessment could lead to either a payment obligation from the university or a return of funds.

“The outcome of the exit, whether it results in a payment to the university or a refund, depends on the timing of the exit. Based on current market conditions, a return of funds from the Cardiff and Vale Pension Fund to the university is anticipated. However, if market conditions change, the university could face a payment obligation of several million pounds. To avoid the uncertainty of a future exit that could result in an unpredictable financial obligation, the university aims to exit the LGPS on November 30 2025.”

Surplus

Any surplus paid to the university would not be used to enhance the pensions of those workers who have contributed to the pension fund, but would go into the university’s general fund.

The trade unions Unite and Unison are representing the affected employees and have put many questions to the university.

In answer to one of the questions, the university said: “We acknowledge that there are differences in the benefits that members will receive for future pensionable service, assuming the proposal goes ahead. As already outlined, it is not possible to make a simple like-for-like comparison, as outcomes will depend on individual circumstances. For example, your calculation does not take account of the University’s proposal to make discretionary enhanced payments above the levels required by the schemes, nor of the differences in normal retirement age.”

‘Unheard’

An academic source at Cardiff University who did not wish to be identified said: “The university’s leadership has spoken recently about resetting our institutional values, but the colleagues affected by this consultation – who have been with the university for decades, and in many cases their whole working lives – feel unheard, alone, and confused by this consultation and the way it has been handled.

“Our colleagues working across university departments, many of whom are the people there to welcome students, visitors and contractors when they arrive on university premises Many of the affected colleagues are worried about their financial future, when they might reasonably might have felt their pension was secure after more than 30 years of service. They certainly do not feel that their contribution is valued.”

A Cardiff University spokesperson said: “The University is currently consulting with 22 staff and their trade unions on a proposal to close membership of the Local Government Pension Scheme and a transfer to one of the University’s pension schemes. Consultation continues with a final position yet to be determined.”