Tuesday 26th September, 4.30-6.00
Appleton Tower Lecture Theatre 3
UCU National Pensions Officer Christine Haswell will be visiting the University on Tuesday to discuss with us the current USS Pensions Consulations.
One of these (1) is between USS and the Universities (UUK) regarding the assumptions which will be used to calculate the current position. The USS Trustee is asking the universities to comment on its proposed assumptions for this calculation. The consultation closes on September 29th. You may have seen reports of huge deficits in the press and it does indeed look like there will be a stated deficit of somewhere around 5 billion Pounds should the current method of calculation be accepted.
However this has been controversial. The basis of the calculation is something called “Test1”. The maths is complicated but the essence of it is the requirement by the Pensions Regulator for these to be done with some regard for prudence. UCU doesn’t disagree with the need for such prudence but argue that USS are being so prudent that they will undermine the pension scheme.
USS are basically arguing for the derisking of the investments of the fund from equities and property into a portfolio consisting of the much safer bonds consisting of Treasuries and company bonds. UCU counter that this would mean a reduction in earnings by the fund of 2% per annum, which compounded out to the 30 year horizon which the fund looks at, is what produces the deficit. There’s a good explanation of this at (2).
USS’s position is that either contributions need to increase by 6.6% of our salaries to fund the consequences of this derisking, or further (as in on top of those in 2011 and 2016) cuts in benefits will be necessary. The employers have been very clear in saying that they will not increase contributions from their current 18% and I think it’s safe to say that we won’t be increasing our contributions from 8% of salary to 14.6% of salary.
UCU hired its own actuaries, First Actuarial, to analyse the position of the fund if this level of pessimism was avoided and look at where we’d be if we simply stayed in a mix of bonds, equities and bonds. They found that given a reasonable assumption (with margin for prudence included) of the extra growth this entails, this would be sufficient to pay the fund’s liabilities (our pensions) in the future. Arguably they are essentially predicting a current surplus. The to and fro of this debate is explained at (2).
It looked for a while as if the employers would be given only USS’s pessimistic assumptions to consider, but one of our colleagues, Sam Marsh, started an online petition at (3) to demand that USS show its workings and that the figures by our actuaries be considered. That’s been successful, but I’d strongly advise that you still sign the petition because it will demonstrate that USS members are not simply shrugging their shoulders, but are engaged in this crucial debate about their future incomes.
Finally, you’ll have recently received a message from Sally Hunt regarding our own consultation on industrial action to defend our pensions. Those of you who know me will understand that I’d absolutely say that we should take such action only as a very last resort. However, after years of our pensions funds being cut and chipped at, I think we’ve got there.
The more alarmist of our colleagues are saying that there may even be a plan to move us from a defined benefit scheme (shared pension fund and shared risk) to the defined contribution schemes now all too common elsewhere. Up to now I’d have been skeptical enough to ridicule this idea. Now I’d have to take an agnostic position because it no longer looks impossible. Certainly running down such a large fund in bonds would be easier than with one invested in equities.
For that reason I’d recommend a “Yes” in the industrial action ballot, to give our negotiators a stronger position; that you sign the petition for the same reason; and that you come along to the meeting on Tuesday.
Honorary Treasurer and Pensions Officer