The USS manages more than £80 billion worth of pension assets on behalf of around 340 higher education institutions and their employees. It is overseen by a Trustee, who has responsibility for the setting of a prudent, evidence-based valuation that will satisfy the Pensions Regulator. The University of Aberdeen and Aberdeen UCU share concerns over the valuation, and the pricing proposals that flow from that, published by the Trustee earlier this month.
The University of Aberdeen and Aberdeen UCU are concerned that the very high prices for current benefits put forward by the USS Trustee will price even more staff out of the scheme and undervalue both the collective and enduring financial strength of the participating employers and the robustness of their commitment to the scheme.
The approach adopted by the USS Trustee does not align with the actuarial advice provided by Aon to UUK and by First Actuarial to UCU; nor does it take into account the evidence presented in the Valuation Methodology Discussion Forum and the advice of UUK and UCU representatives who attended that forum. We are living through a uniquely challenging time. There is clearly a range of reasonable assumptions that the USS Trustee could adopt, and it is important to employers and employees alike that the valuation approach should not be based on a forward projection of the current set of conditions.
We share a common concern that the very high prices to maintain current benefits put forward by the USS Trustee are unaffordable to members and to employers. The relatively modest benefits on offer under all options would also fail a ‘value for money’ test for many employees, again risking pricing staff out of the scheme. Since those who are at early stages of their career would be particularly affected, this would also increase the intergenerational imbalance already evident within the scheme, and undermine the ability of UK universities to attract exceptional talent and retain their high international standing. Despite the length and complexity of the recently published criteria, we have not yet seen a clear justification for the USS Trustee’s pricing decisions. It is our shared opinion that they are unrealistic, and that members are entitled to a stronger and clearer justification. Without this, the University of Aberdeen and the Aberdeen UCU are concerned that the scheme is facing an unnecessary and unjustified level of reform. We call on the USS Trustee to review its approach.
UUK will shortly consult all USS employers on the way forward to address the scheme’s high opt-out rate and sizeable deficit, including covenant support measures, affordable benefit structures and contribution levels. As part of this consultation, UUK will encourage employers to seek the views of all their staff eligible for USS. The University will be setting up information sessions for staff as well as posting information on the University’s website. It is extremely important that USS members and those eligible for membership engage in this consultation to inform the University’s response.
It may be that significant differences in the respective positions of the University and Aberdeen UCU with regard to the need for and extent of USS reform may emerge in the coming period. We are nevertheless committed to an open and collegiate dialogue as the sector steers a course through this process.
Professor Karl Leydecker
Dr Frederick Pederson
Dr Syrithe Pugh