Pension expert slams tuition fee rise to fund university pension shortfall idea
Steven Cameron, pensions director at Aegon said increasing tuition fees to fund the gap would be ‘robbing grandson Peter to pay grandpa Paul’. At £9bn, the Universities Superannuation Scheme (USS) now has the largest pension deficit of any UK pension fund.
The USS funds pensions for academics and has more than 390,000 members. Poor investment management has been blamed for the weakness of the fund.
Cameron said: “Gold-plated defined benefit schemes are rarely open to those joining today’s private sector workforce, but the funding shortfalls of many existing schemes are having wide reaching implications which can pass down through the generations. Employees are now much more likely to be offered membership of a defined contribution scheme, but employers struggling to shrink defined benefit scheme deficits will be less inclined to offer more generous contributions above the automatic-enrolment minimum to new employees.”
He added the suggestion that universities may need to increase the tuition fees for today’s students to fund the huge pension shortfall “takes intergenerational unfairness to a new level”. It would give future generations high debt to make good on pension promises offered to previous generations.
He said: “Some joining the workforce with significant student debt, facing high interest rates, may be tempted to save on their pension contributions by opting out of their employer’s pension scheme. But this only perpetuates the problem as not only do they lose out on valuable employer contributions, it is contributions paid while younger that have longest to grow to fund more in retirement.”