November 28, 2017

Which way forward for USS?

A couple of weeks ago I was surprised to learn that Universities Superannuation Scheme (USS) trustees have adopted a more conservative approach to the valuation than had been the case in the last consultation, and that the collective response from the Universities UK (UUK) consultation is now apparently supportive of the removal of the defined benefit element of the current scheme, at least for the immediate future.

It is a very significant change, that if implemented, will greatly impact on a large number of colleagues in Warwick, as well as in other universities around the country.

I am sure that I am not alone in being mystified at this change. After much work and consideration, we were relatively comfortable with the level of risk proposed previously by the trustees and broadly content with assumptions which appeared valid in the round. We reported as much in the consultation formally. USS is now the largest remaining defined benefit scheme in the country not backed by government (on which, more later). There has been a market logic to a number of private sector defined benefit schemes being closed. There are concerns about the levels of funding required to keep it functioning, and these concerns seem very widespread at the moment.

The assumptions in the consultation with the sector have now been altered, and so I support calls from others for more transparency, particularly on issues such as self-sufficiency, mortality assumptions and projections for gilt yields, since these are the building blocks upon which a new greater conservatism has been placed.

I can assure Warwick staff that we will reiterate our previous concern that the proposed de facto end to the defined benefit scheme will require USS’s investment strategy to become increasingly cautious, which would materially inhibit the future growth of assets out of which pensions will ultimately be funded.

The latest iteration of the valuation has very serious consequences for staff and for employers in the sector, and we want to explore how we can get to a position where there is a threshold for the defined benefit scheme which is workable and supports early career academics in particular.

We are very conscious that there are alternative more attractive schemes in place elsewhere in the sector (e.g. Teachers’ Pension Scheme which is available to the post-92 sector) and are increasingly concerned that a very large multi-employer scheme, such as USS, is being placed in the same regulatory regime as that applied to more traditional private sector schemes, with far reaching consequences for staff in pre-1992 higher education institutions.

So what is to be done? First, we will press, as above, for greater understanding and explanation as to what has changed in the process. But second, I think we should also explore the possibility of obtaining government backing for the pension scheme and the possible benefits that might bring. A government backed scheme becomes an asset for the government, but provides vital underpinning for members.

Whatever happens we will not let the current increasingly conservative approach to USS go unchallenged. As a University, we need to be able to offer a competitive and high quality pension scheme and we will seek to work with any other interested parties to identify whether any alternative, more innovative, solutions may be feasible.


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- 3 comments by 1 or more people

  1. Dave Guppy

    Stuart

    You don’t know me: I’m one of the UCU-nominated Directors of USS.

    Can I congratulate you on making your concerns about USS public. I believe there are other VCs who have similar concerns and I hope your initiative encourages them to come forward, either publically, and/or, perhaps more importantly, to encourage UUK to explore a broader range of ways forward.

    Regards
    Dave Guppy

    28 Nov 2017, 21:40

  2. Alastair Smith

    Stuart,

    Thank you for this bold public statement. I have been concerned that the opportunities for uniting the interests of university employers and their staff on the revaluation of the USS pension scheme were being overlooked. Though I remain very supportive of the significant steps being taken by the UCU to ensure staff interests are upheld, your statement gives me hope that the university sector can come together to ensure attractive and secure pension provisions – that hopefully set a standard for others – without unnecessary internal divisions.

    I hope the University of Warwick will support your leadership in publicising this blog as widely as possible. For example, as a direct link on the university Facebook page, via our twitter accounts, and ideally through formal media publications such as THE.

    I also suggest that individual staff members of the university do their utmost to share this statement, with wider HE networks and well beyond – all as a means to encourage those others, alluded to by Dave Guppy, to speak out in public critique of the current USS and UUK positions.

    29 Nov 2017, 14:10

  3. Mary Corcoran

    Previous comments from other senior University staff suggest that the proposed move to a defined scheme comes from a few universities (more specifically ‘providers’). They should come out publicly with their plans so that we know which institutions intend to honour members’ pensions and which do not. It would be mistaken to underestimate the determination of ICU members on this, third, alteration in pensions in recent years.

    02 Dec 2017, 19:22


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