October 15, 2014

Poor and misleading reporting on the USS crisis by the Times Higher Education

I have just read an article by Jack Grove about the USS dispute (Universities unveil firm pension proposals) which is very very misleading.

He writes that there is a deficit of £8 billion PER YEAR. That is wildly incorrect. The deficit is not an annual payment. It is a notional capital sum and as such has no time dimension.

The USS deficit is the difference between the estimated value of the assets (an enormous approximate number) and a notional estimated value of the liabilities (another even vaguer approximation).Hence it is a wildly volatile figure with only limited practical meaning. (This diagram puts it in perspective. We should not get carried away by figures quoted in billions of pounds. We should get them in proportion.)

There is no "per year" deficit. In fact the latest Annual Report shows that the scheme makes a net surplus of £1 billion per year.

He also repeats the employers' claim that a reason for the deficit is poor investment returns after the financial crisis. In fact the USS's investments did well last year making a relatively good rate of return of 7.6 percent. It did not do as well as the Prudential but its performance was one of the best among pension funds. Whatever the reason for the deficit it is not poor investment returns.


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