Tuition fees 'may have to rise £1,000 a year to cover pension black hole'
The deficit in the University pension scheme is actually £10.5 billion, an analyst has claimed, and to plug the hole institutions may need to raise fees by £1,000 a year
When questioned about whether tuition
fees would have to rise David Willetts, the Universities Minister, said
it would be unfair to make the students pay Photo: Christopher Pledger
Tuition fees will have to rise by £1,000 a year to cover a massive black hole
in a University pension fund which is worse than previously thought, it has
been claimed.
The Universities Superannuation Scheme (USS), used by staff across the UK, has
one of the biggest deficits in the country which new analysis has put at
£10.5bn.
To cover this shortfall the institutions will need to raise their fees by
£1,000 a year, an analysis for BBC’s Newsnight has found.
The USS, the biggest pension fund in the country with 303,000 members, put its
own deficit at £7.9bn in a report released last month.
However, pensions consultant John Ralfe, former finance director of Boots,
said that using the same analysis methods that private companies use put it
much higher at £10.5bn.
He said: “The fees are probably going to have to go up from £9,000, which is
the maximum, by about £1,000. It is a thousand pounds that each individual
undergraduate has to pay not just next year but for the next 20 years.”
Higher Education Minister David Willetts said that Universities are autonomous bodies who know they have to back their pensions and tackle deficits.
He added: "It would be wrong to expect students to bail out pension deficits to support pension schemes that are far more generous than students are likely to enjoy when they're older."
The USS has assets of £37.9bn – more than three times what taxpayers spend every year on higher education – but has admitted that it has a huge deficit.
Mr Ralfe, who puts it at billions higher than they estimate, claims that to make good over 20 years it would require a near doubling of contributions from Universities to £1.8bn.
But the system is in “denial” about the true state of affairs, he said, adding: “There will be repercussions for the university sector. All we're doing is bequeathing a very real problem to our children.”
Prof Craig Calhoun, director of the London School of Economics, said the size of the scheme's black hole was “very worrying” and looked “even more worrying” for the future,
"It would be an added cost that we would have to cover either from tuition fees or some other source, either philanthropy or earnings from consulting or other enterprises," he told Newsnight.
University staff, who are already preparing to strike next week over pay, could also be asked to contribute more to their pensions after a landmark agreement which states that they have to share any increase in costs with their employers,
Bill Galvin, chief executive of USS, said that asking for extra contributions from the employers sponsoring the scheme was the “normal process”. He said: "It's been done in 2008. It's been done in 2011. We're looking at it again now."
Higher Education Minister David Willetts said that Universities are autonomous bodies who know they have to back their pensions and tackle deficits.
He added: "It would be wrong to expect students to bail out pension deficits to support pension schemes that are far more generous than students are likely to enjoy when they're older."
The USS has assets of £37.9bn – more than three times what taxpayers spend every year on higher education – but has admitted that it has a huge deficit.
Mr Ralfe, who puts it at billions higher than they estimate, claims that to make good over 20 years it would require a near doubling of contributions from Universities to £1.8bn.
But the system is in “denial” about the true state of affairs, he said, adding: “There will be repercussions for the university sector. All we're doing is bequeathing a very real problem to our children.”
Prof Craig Calhoun, director of the London School of Economics, said the size of the scheme's black hole was “very worrying” and looked “even more worrying” for the future,
"It would be an added cost that we would have to cover either from tuition fees or some other source, either philanthropy or earnings from consulting or other enterprises," he told Newsnight.
University staff, who are already preparing to strike next week over pay, could also be asked to contribute more to their pensions after a landmark agreement which states that they have to share any increase in costs with their employers,
Bill Galvin, chief executive of USS, said that asking for extra contributions from the employers sponsoring the scheme was the “normal process”. He said: "It's been done in 2008. It's been done in 2011. We're looking at it again now."
