SAUL plans DC ‘feeder’ scheme
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University pension fund SAUL is asking new joiners to help ease its contribution strain by remaining in a defined contribution ‘feeder’ section for the first three years before being moved to career average. The scheme is also hiking employer contributions and changing its funding and investment strategy.
SAUL provides benefits for university support staff in 50 colleges and institutions across London and was 109% funded at the end of April this year. The £3.6bn scheme’s funding level temporarily fell to 94% on 31 March 2020, the date of its last full valuation, which also showed an increased cost of funding future benefits.
New joiners to help ease contribution strain
In the context of the last full valuation, the trustee asked the scheme’s negotiating committee, made up of employer and union representatives, to recommend ways to reduce the cost of future pensions, which is expected to be about 35% of salaries, rather than the current 22%.
Unions Unison and Unite, after consultation with their respective constituencies, said they could “confirm a mandate for pursuing the 3-year Defined Contribution (DC) Feeder Scheme on the basis that members of the DC Scheme who are still in employment with employers in the scheme after 3 years will then join the Defined Benefit Scheme”, according to a letter sent to employers by Unison regional organiser Sam Ferman.
“Moving forward, and in light of the further discussions required around the details of the DC Feeder Scheme, the unions' representatives will be seeking to work with [employers] on developing plans which ensure the transition of future members to the defined benefit section following service within the DC Feeder Scheme in addition to exploring equalities issues,” Ferman added.
As a result, the scheme with 65,000 members is now planning to put joiners into a DC scheme for the first three years of membership from 2023 onwards. "We know that lots of members only stay in SAUL for a short time. This new pension will be more flexible for people who aren’t in SAUL for long, and easier to transfer to a new employer if they move. After three years, they’ll ‘feed into’ the current SAUL scheme and build up pension in the same way as current SAUL members,” the scheme said.
Scheme still ‘subject to discussions with TPR’
Unite regional officer Andy Murray said the proposal was still “subject to discussions with the Pensions Regulator before more detailed discussions take place on the SAUL Negotiating Committee in relation to a DC feeder scheme”.
A spokesperson for SAUL said: “We still have decisions to make, especially about how we’ll run the new feeder scheme, and the Trustee, employers and unions will continue to work together, as we’ve always done.”
As well as introducing the three-year DC phase, SAUL will ramp up employer contributions again, which will rise from 16% to 19% from next April, before increasing to 21% in January 2023. Employers last saw an increase in contributions when the scheme switched from final salary to CARE in March 2016. The employer contribution to the planned feeder scheme would be the same as for the CARE scheme, according to Unite. Employees will continue to pay 6%.
The trustee is also planning to make some changes to scheme's funding and investment strategy.
