Higher Education (HE) institutions are in a period of significant change as new funding regimes and student fee structures have recently been introduced.

The sector also faces a series of concurrent pensions-related challenges and the potential for complicated discussions with staff and a reduction in morale.

Challenges

The main challenges are those arising from the redesign of the nationwide and public sector schemes in use at many institutions such as the Universities Superannuation Scheme (USS) and Local Government Pension Scheme (LGPS).

This leads to the need to train administration staff in the new scheme requirements, amend systems and set up new routines as well as generally increased administration requirements.

Auto-enrolment legislation and requirements to re-enrol employees will have a similar impact on systems and staff, particularly given the quite tricky requirements relating to when the different categories of employees have to be automatically enrolled, or re-enrolled after opting-out.

Controlling costs

Overarching these are the issues of affordability of pensions themselves and increasing employer costs. For universities who are operating their own schemes, the pressure to control costs is just as relevant as in the larger public sector schemes.

We work with our clients to ensure that they understand the risks (and opportunities) that pensions pose to their future financial sustainability and their ability to deliver on their strategic plans. 

Defined benefit schemes

The key financial risk for institutions will be that associated with any defined benefit (DB) schemes.  DB schemes are very complex.  It is not always intuitive how a DB scheme will react in particular financial circumstances, or given a particular change in strategy, and we find our interactive modelling tool Illuminate to be key to ensuring understanding of a given strategy.

Illuminate

Illuminate allows you to model the impact of changing the structure of the scheme such as changing the investment strategy or undertaking ‘liability management exercises’ (such as enhanced transfer values, pension increase exchanges, or annuity purchase); to see how the risk profile is affected, and what the impact is on the contribution rate.

We find this to be an excellent way to ensure understanding of the drivers of change.  This is particularly relevant for any SATs where you have more ability to influence/set strategy, but can also help explain the risks around any wider DB schemes that you participate in (eg USS, TPS or LGPS).

Services for higher education services

DC consulting

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Pensions tax advice

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Wellbeing

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