Comments on 2018 USS JEP Consultation

Comments on University of Liverpool response to USS pensions consultation

Members may have seen the University’s response to the USS consultation and the Joint Expert Panel’s recommendations.

The Branch Committee has the following comments to this response:

A. In Point 1, The University of Liverpool endorses the JEP valuation recommendations.

B. In Point 2, The University of Liverpool cites 20.1% employer contributions as the upper limit of sustainability.

The Branch Committee notes that in the USS covenant review and assessment undertaken in 2016 by PwC, employers can in fact afford to increase their contributions to 21%. In fact the UUK summary of the USS covenant review and assessment suggests that employers could push all the way to 25%

C. In Point 4 the University of Liverpool claims that “the JEP suggest that, if their recommendations are accepted, employee contributions will rise to 9.1%”

The Branch Committee notes that the JEP recommends an increase of total contributions from 26% to 29.18%. In other words, an increase of 3.18%. However, as the JEP report repeatedly notes, it is a matter for the UCU-UUK Joint Negotiating Committee, not the JEP, to determine how this increase will be split between employers and members (see JEP report pp.7, 43, 60-61, 87). Therefore the University of Liverpool’s claim that JEP suggests employee contributions will rise from 8% to 9.1% is erroneous and misleading. (See USSbriefs52)

D. In Point 5e Part 1, The University of Liverpool notes, “we are not sure, therefore, where this now leaves Test 1”

The JEP report correctly criticised that “Test 1 has led to a valuation that is model-driven rather than model-informed” (p.24). Additional research by Dr Sam Marsh, mathematician at University of Sheffield and Sheffield UCU president, however, has gone one step further. In fact USS itself has misapplied “Test 1”, using incomplete calculations of asset performance and contributions into the Scheme (See USSbriefs59). USS is not in deficit according to its own valuation methodology.

E. In Point 5e Part 2 The University of Liverpool notes “the need to gradually de-risk USS remains at the forefront of our mind”

The Branch Committee notes that the University fundamentally misunderstands de-risking. De-risking is not the solution to USS’s funding predicament: it is the cause. It is hard not to wonder whether key figures in USS and UUK, wanted the Defined Benefit scheme to be closed or reformed drastically, regardless of its long-term health and the best interests of its members.

F. In Point 5e Part 2, The University of Liverpool claims “our own view from the recent Mercer events is that staff are at the limits of their risk appetite”.

The Branch Committee notes that there is little substantiation to this claim. We recommend that the University, like the JEP report recommends, conduct robust and transparent surveys of employees’ “risk appetite” before making such claims.

G. In Point 9, the University of Liverpool states “it would be good if UUK could ask USS for projections on the real terms (with CPI inflation) value of the scheme’s assets in 20 years’ time, modelling different approaches to de-risking, perhaps with de-risking over years 11-20, over years 1-20, and with no de-risking of assets at all”

The Branch Committee notes that University of Liverpool implicitly backs Dr Sam Marsh’s approach for proper asset growth information.

H. In Point 10, the University of Liverpool expresses concern that “we still need to wait for the results of UCU’s Special Sector Conference on 7 November and, how realistic it will be for USS to apply for the JEP recommendations in the 2017 valuation which is already considerably overdue”.

The Branch Committee notes that it is inaccurate to continually cite the Pensions Regulator’s supposed “inflexibility” regarding the 30 June 2018 deadline. For example, in April 2018, the Pensions Regulator permitted the British Tourist Boards’ Staff Pension and Life Assurance to delay its 2015 valuation.