April 01, 2015

Meeting between academic pensions experts and USS CEO

Following their letter to the USS trustee, signed by many of the country's leading academic experts on actuarial science, my colleagues Professors Jane Hutton Saul Jacka of the Statistics Department were invited to meet the USS chief executive, Bill Galvin.

Jane has now posted the following account of the meeting on her website.

Meeting with Bill Galvin, CEO of USS.
Saul Jacka and I were invited by Bill Galvin, CEO of USS, to meet him 'in a spirit of openness and transparency'. The meeting took place in London on Friday 27 March 2015. Jeff Rowney, the senior internal (USS) actuary, Ali Tayyebi, the scheme actuary from Mercers and Brendan Mulkern, Chief Policy and External Affairs Officer for USS were also present. Although Bill Galvin initially made his excuses, he stayed for almost an hour.

Ali Tayyebi made it clear that a major driver for the single estimate of the deficit which has been made public was the UUK's insistence that the employers' contribution could not go above 18%, as they could not afford more. However, UUK also insisted that the salary forecast should be CPI + 2%, (RPI + 1%, or they might be minded to accept RPI+0.7%), substantially above the historical position, even when the unprofessional discarding of the last three years actual salary position is used. So the UUK position is incoherent: they say they cannot afford to pay for pensions, but they can afford to assume a rate of pay increases which is know to be well in excess of what is actually paid. I reminded Ali Tayyebi what the statistical definition of bias is; the evidence is that the assumption on salaries gives a large over-estimate of the liabilities. There are other inconsistencies, and circular arguments, rehearsed again by the actuaries.

Ali Tayyebi also stated that describing uncertainty was a fundamental part of his advice. He had provided numerous different estimates of the deficit, under all the assumptions which we and Imperial College suggested, and many more, to the USS Trustee and the UUK. The USS Trustee has had open discussions with UUK. Bill Galvin said that, to his knowledge, nothing had been withheld which people have asked for. I find this strange, as both institutions (Warwick, Imperial College) and individuals have requested sight of a range of valuations.

Bill Galvin said the range of estimates of the deficit or surplus of USS will be released after the consultation. It seems to us that the USS Trustee and the UUK are withholding important information from members. We do not see how the USS Trustee can claim to be acting for the benefit of members and standing up to employers (two of their statutory duties) whilst failing to provide a range of estimates until after the consultation. In my opinion, I should not trust the USS Trustee to be open, transparent, or willing to respect beneficiaries of the USS.

I cannot find the 'openness and transparency' which was offered. Our replies to the consultation must request sight of the full set of estimates provided by Ali Tayyebi for Mercer.

Jane Hutton"

It is important to realise that it is not really the actuaries who should be engaging in these discussion since their role is to carry out formal analyses on the assumptions that are given to them by the trustee. The same actuary might give a range of answers if asked to consider a range of different assumptions. Also different actuaries might very well give different conclusions if asked to consider a wider range of methods rather than just the conventional one (as has been demonstrated by the First Actuarial report).

So it would have been better perhaps if the meeting had been with some of the trustees. It is they who are taking the decisions (no doubt with advice from Bill Galvin). And they (other than those appointed by the UCU) are paid very handsomely for it.

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