A post-92 university will freeze staff pay if they choose to remain in a more expensive pension scheme as institutions continue to find new ways to grapple with rising costs.

Northumbria University wants to move existing academic employees from the Teachers’ Pension Scheme (TPS) to the Universities Superannuation Scheme (USS) in an attempt to save up to £11 million annually.

It will incentivise staff to do so initially with the offer of a one-off payment of between £5,800 and £10,000 before then moving to a system of “reward envelopes”, based on an employee’s total salary and their employer pension contributions, to determine how future pay increases are implemented.

Staff who transfer to the USS will see their salaries rise in line with the nationally agreed pay uplift, while employees who choose to remain in the TPS will not see an increase in their take-home pay.

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This is because their take-home pay and the cost of their pension contributions will “exceed the envelope for their grade point”, explain Jane Embley, chief people officer at Northumbria, and Tom Lawson, deputy vice-chancellor and provost in a  published on 7 November.

“However, over time, when the value of the total reward envelope for colleagues in USS and TPS has equalised, the salaries for those choosing TPS will increase again,” they write.

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The university argues that this will give staff the choice over “how much of their total reward they receive as income now and how much we pay in pension contributions”, meaning it can still meet its legal obligation to offer the TPS to staff, even though it hopes the USS to become the “normalised” pension choice in future.

“While to some this will be controversial, ultimately, our proposed approach will mean that over time (likely to be up to seven years) the reward envelope (or cost) for USS and TPS employees will have equalised and as such we will have eliminated the differential costs of employing these two groups of colleagues undertaking the same roles, and be on an equal footing with other universities,” Embley and Lawson say.

Post-92 universities have long campaigned against their legal obligation to offer academic staff the TPS, which now has an employer contribution of 28.68 per cent, compared with employer contributions of 14.5 per cent on the USS, more commonly offered to staff at older institutions.

Embley and Lawson write that TPS contributions are “compounding” the financial difficulties faced by post-92 universities, and say “the severity of the current situation means the moment for change is now”.

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They note that for every 1,000 staff, an institution faces more than £8 million in additional costs per year if staff are members of TPS rather than the USS. At Northumbria, this cost exceeds £11 million.

Many post-92 universities have already taken action to reduce their pension contributions, with universities including Coventry, Worcester and Portsmouth transferring staff to subsidiary firms, meaning they are longer obliged to offer them the TPS.

However, Embley and Lawson say this route means staff are not eligible for participation in the Research Excellence Framework, and “as a research-intensive institution, we did not consider [this] to be a path we could take”.

The government recently signalled in its skills White Paper that it was prepared to look again at whether universities should be compelled to participate in TPS.

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But Embley and Lawson say “the time for change is now…and we cannot wait for the outcome of a consultation or for the government to decide how it will seek to address this obvious disparity in the sector”.

juliette.rowsell@timeshighereducation.com