- 70% of the DB schemes run by pre-1992 universities for non-academic staff remain open to future accrual, with 26% also open to new hires. In contrast, 77% of UK DB schemes are closed to future accrual
- Longer investment time horizons mean the sector can benefit from Pension Schemes Bill 2025 surplus easements
- Running costs need looking at to ensure schemes provide value for money – current costs average £775,000 per annum, but vary from under £100,000 per annum to over £2m per annum
- Costs could be cut by as much as 30% through simplifying governance and improved use of technology and automation
New research from Spence & Partners (Spence), one of the leading providers of pensions advisory and data services to pensions schemes in the UK, reveals the DB pension schemes for UK universities non-academic staff could save an average of £230,000 per annum through simplifying governance and improved use of technology and automation.
For the research, Spence has analysed the current running costs of 30 DB schemes for pre-1992 UK universities. These schemes have a combined total of £6.9bn in assets. Most pension provision in higher education is through large multi-employer schemes such as the Universities Superannuation Scheme (USS). However, many of the pre-1992 universities then have their own DB schemes for non-academic staff.
The research shows that funding levels for the pre-1992 university DB schemes have improved dramatically in the last two years with rising Gilt and investment grade corporate bond yields. This has also shrunk scheme liabilities, often by as much as 40%, meaning many schemes are now less of a risk to university balance sheets.
Key developments in the last year include:
- The pensions regulatory environment is encouraging strategies other than insurance buy-out for DB schemes to better deploy the £1.2trn of assets in DB schemes for the UK economy.
- With 70% of university DB schemes still open to future accrual, the run-on opportunity is more significant for universities than many other employers.
- The new funding regime is in place and expects schemes to have a funding plan to reach a ‘low dependency funding basis’. 84% of university schemes are in deficit on this requirement.
- The new funding regime also calls for an expense reserve in some cases. This will mean reviewing costs and processes to effectively manage the expense reserve.
Read the full analysis and discover what actions universities could be taking to respond to these developments.
