#USSstrike: USS Unis See £3.5bn Surplus Boost While Cutting 2,600 Jobs

By James Brackley, UCU activist and lecturer in Accounting at the University of Birmingham

This analysis draws on the open source data collection of UK HE Financial data for the 2020/21 financial year put together in the past two weeks by UCU reps up and down the country, following the statutory reporting deadline of 31 January 2022.

It comes in the context of ongoing negotiations between UCU and Universities UK, and in advance of the upcoming negotiating meeting on the 22 February 2022. It follows the recent UCU proposal to employers that we maintain the existing USS benefits, commit to a new valuation as at 31 March 2022, and implement a temporary increase in contributions. Proposals that USS has confirmed are ‘implementable’.

The analysis shows that USS employers are in a very strong financial position, having grown their net asset base significantly in 2021 on the back of increased tuition fee income and reduced staff numbers. Together, the 59 institutions analysed generated £3.5bn in surpluses while overseeing a net reduction of 2,600 jobs.

I would like to thank all the reps who have contributed to the open source data that has made this analysis possible, particularly Ellen Owens of the University of Reading, and also our USS negotiators Deepa Driver, Sam Marsh, and Marion Hersh.

If you have any issues with this analysis, or would like to write for the blog, please email beyondeducation@riseup.net

Key financial figures for 2020/21 Financial Year

The key figures coming out of this initial analysis are as follows [1]:

Implications for the USS dispute & upcoming negotiations

The USS scheme is what is sometimes referred to as a “last man standing” scheme, meaning that any liability falls jointly across all of the scheme’s employers and is not dependent upon the financial position of any one institution. The £39bn net assets position of major USS employers, above, therefore represents a significant financial safeguard against any possible deficit in the USS scheme – a figure which already accounts for a 2018 valuation deficit of £3.6bn.

Furthermore, this net asset position has substantially increased (by 12% or £4.2bn) since 2020, reflecting a broader bounce back in financial performance following the pandemic. Indeed, USS institutions have now posted considerable surpluses across both 2020 and 2021 on the back of better than anticipated student recruitment and cuts to staffing.

In terms of the USS provision in the accounts – which relates to the present value of future employer deficit reduction contributions [2] – the total provision recognised across the sector as at July 2021 was £3.6bn. The same amount as was recognised as at July 2020, with minor movements in the provision at individual institutions in 2021 reflecting movements in staff numbers and other assumptions in the actuarial analysis. In both 2020 and 2021 the USS provision accounted for was based on the 2018 scheme valuation.

Going back a little further, the USS provision accounted for as at July 2019 was £7.5bn, which was based on the widely discredited 2017 valuation. This had the effect of substantial one-off “unrealised” costs being recognised in the 2019 accounts, which were then largely reversed out in the 2020 accounts (for further critical analysis of the underlying accounting treatment of the USS provision see my piece for Birmingham UCU).

In sum, this means there were very large “unrealised” costs debited to the accounts of 2019, then very large credits posted to the accounts in 2020 reversing out most of the unrealised costs from the year before, then relatively little movement in 2021. The result being the remaining £3.6bn provision, currently shared across USS employers.

Should the current UUK proposals in relation to the defined benefit and defined contribution elements of the USS scheme be implemented based on the 2020 valuation, the “deficit” to be funded and accounted for in 2022 would be £14.1bn (a net increase in the provision of £10.5bn). Should current benefits remain unchanged, the “deficit” to be funded and accounted for in 2022 would be £18.4bn (a net increase in the provision of £14.8bn). Assuming in both cases that the present value of any deficit recovery payments closely accounts for the overall deficit in the scheme [2].

All of which sounds quite scary, however, employers themselves now widely accept that the 2020 valuation overestimates the deficit, with the USS’s own analysis showing that as at January 2022 the like-for-like deficit was in fact £2.9bn. Furthermore, alternative analysis provided by Woon Wong for the Royal Economic Society argues that the scheme is in fact accumulating surplus assets, so that even the £2.9bn deficit at January 2022 is based upon unnecessary and unrealistic prudential assumptions that are not required under legislation. 

[Scheme Funding: What’s the latest picture? (USS, 2022)]

So that, at worst, we will be a similar position in 2022 as we were in 2019, with large one-off USS provision adjustments being posted to the accounts, only for them to be reversed out the following year.

But putting that aside and supposing that the artificial deficits produced by the 2020 valuation remain, together with our current benefits in retirement, the required £14.8bn increase in the USS provision would still leave the sector with at least £24bn of net assets. Indeed, considerably more if we continue to see the sector generate very large surpluses year on year, and if the other institutions not included in this analysis were also to be taken into account.

In short, even if we take the 2020 valuation at face value (which we absolutely should not), the sector has the assets to cover any deficit, via a revised deficit recovery plan, and then some, bearing in mind the “last man standing” nature of the scheme.

This clearly puts claims made by Phil Harding, lead employer representative on the Joint Negotiating Committee, and other similar claims from Universities UK to the sword. For example:

It is clear from employer feedback that the vast majority of institutions would not be able to pay more into pensions from an already high 21.1% without having to find that money from elsewhere in their budgets – potentially having consequences on other employer activities, student experience or jobs. (July 2021)

Not only is the total deficit in the scheme clearly and demonstrably affordable from a balance sheet perspective, of the 59 institutions analysed 50 reported (often very substantial) surpluses and together the 59 institutions reported a net surplus of over £3.5bn. They also held more than £8bn in cash, up 20% on 2020, and made similar gains across a range of other financial performance metrics.

Indeed, the situation is precisely the inverse of that suggested by Mr. Harding – rather than protecting staffing and student experience in the face of possible financial hardship, USS employers have in fact undercut staff costs and substantially increased their tuition fee income in order to generate incredible profits. Activity that now seems tantamount to profiteering.

Across the 59 institutions analysed, staff numbers fell by 1.1% (more than 2,600 net jobs lost) while taking in an additional 6.4% in tuition fee income (more than £700m). With remaining staff teaching ever more students and working day and night to redesign courses for online and hybrid delivery.

Mr Harding continues to justify the unaffordability of our pensions as follows:

With the loss of government capital funding for higher education, institutions need to be able to borrow money to sustain their investment in the physical and digital infrastructure. This level of proposed employer covenant support will limit employers’ ability to borrow money in the future, lead to higher borrowing costs, and could be a barrier to improving courses, support and services to students and staff.

Aside from the fact that grant income for USS employers actually increased in 2021 (by £468m) what sort of justification is that? That we should give up our pensions so that our employers can borrow more money is nothing short of insulting to members of the USS.

In a piece for USS Briefs in 2020 I showed that employers across the sector (based on 2019 HESA data) had put themselves at considerably more financial risk by increasing their total external borrowing by 48% in the four years to July 2019, to a sum total of £14bn. Increasing their debt and drastically decreasing their ability to cover interest payments in order to chase competitive advantage in an increasingly saturated HE market place. The idea that we should now throw our pensions under a bus so that employers can take on more debt is a quite astonishing defence to put forward and it should be no surprise to employers that they now face sustained industrial action.


By drawing upon the latest financial data, this analysis demonstrates that “USS institutions” – that is institutions who offer the USS scheme as the standard pension package and who cover the vast majority of the scheme’s members – are collectively in a strong financial position and posted exceptionally strong financial performance figures for 2021.

Especially galling for staff and students across the sector is that these results appear to have been driven by big gains in tuition fee income and cuts to staffing as institutions enacted recruitment freezes and voluntary (and sometime compulsory) severance schemes.

These results show that the sector is more than capable of absorbing the now historic deficits that resulted from the 2020 valuation on a collective basis. It also notes that any deficit recovery provisions posted in 2022 will more than likely be reversed out almost entirely in 2023, even on the USS’s own methodology.

There therefore appears to be no financial case whatsoever to fundamentally restructure the defined benefit element of the USS. Nor does there appear to be any financial case to ask existing members of the scheme to increase their contribution rates – with the latest figures for January 2022 suggesting that we are already overestimating the scheme deficit in the 2021 accounts on a like-for-like basis and with almost all USS employers already generating large surpluses.


[1] This analysis draws on all 59 major USS employers who had published their accounts as of 18 February 2022. This is based on the list of institutions balloted by UCU in the live USS dispute, which covers 66 institutions and that vast majority of USS members nationally. The institutions omitted from the analysis due to late filing of their accounts were Durham University, Heriot-Watt University, Swansea University, UCL, University of Reading, and the University of Strathclyde. IDS and SAMS were excluded as they do not prepare their accounts under the HE SORP while the University of London was added to the analysis.

[2] The USS deficit is recognised in the accounts of each institution on the basis of the present value of the “deficit recovery” element of employer contributions for all staff in the scheme at that institution. The variables by institution are the future deficit recovery payments together with the usual actuarial assumptions covering future staff costs (during employment, in this case, as opposed to during retirement). The deficit reduction plan underlying the USS provision in the accounts for 2018/19 through to 2021/22 were/are as follows:

2018/19 (based on the 2017 valuation & a £7.5bn deficit): An initial 2.1% up to 1 April 2020 increasing to 5% through to 31 March 2034.

2019/20 & 2020/21 (based on the 2018 valuation & a £3.6bn deficit): Deficit recovery contributions of 2% from 1 October 2019 to 30 September 2021 and then 6% to 31 March 2028.

2021/22 (based on the 2020 valuation & employer proposals for revised retirement benefits & a £14.1bn deficit): If the Benefit Change Deed is entered into by 28 February 2022 the revised plan will be based on deficit recovery payments of 6.3% from 1 April 2022 to 31 March 2038.

Or 2021/22 (based on current benefits & an £18.4bn deficit): some revision to the deficit recovery payments designed to cover the £18.4bn deficit.