Some staff have sent emails to the VC urging him to rethink his position on USS in the light of new evidence that the perceived deficit on which the current UUK proposals are based has all but disappeared. They received a standard response email from the Finance Director, Sarah Pook, and shared it with us. We wanted to investigate some of the assertions made in this email and consulted pensions expert, Mike Otsuka, from LSE. He has provided us with these helpful comments which challenge many of her key points and suggest that UoS is doubling down in its defence of a fundamentally flawed position adopted by UUK.

Sarah Pook: ‘In the spirit of ensuring that everyone has awareness of all views to ensure the widest possible understanding of the situation, I thought it would be helpful to make you aware of the response and clarification given by Universities UK, on behalf of USS employers, to the latest UCU comments relating to the USS Trustee’s latest monthly monitoring report of the pension scheme:

The USS Trustee has a legal duty to conclude the 2020 valuation, and has determined the contributions payable by both employers and members under the 2020 valuation. These contributions are set out in the schedule of contributions and are legally payable until superseded at a future valuation’.

Mike Otsuka: The bold bit of this statement is false: “These contributions are set out in the schedule of contributions and are legally payable until superseded at a future valuation.” Even in the absence of a new valuation, USS could issue a new recovery plan and schedule of contributions, which reflects the current, improved funding level of the scheme as indicated by the monitoring of the 2020 valuation. Moreover, even in the absence of a new valuation, JNC could revoke the UUK cuts and replace them with a higher level of benefits, costed in a similar way.

Sarah Pook: ‘It is good news to see an indicative improvement in the funding position, but this is monthly monitoring and not a full actuarial valuation which requires a full process including revised covenant assessment, and statutory consultations to be concluded amongst other processes; as we know this takes considerable time to conduct.’

Mike Otsuka: The above is true. Nevertheless, it would be possible, while awaiting the results of a full actuarial valuation with more reasonable (less excessively conservative – aka ‘prudent’) underlying assumptions than the 2020 valuation – to revise the recovery plan and schedule of contributions to reflect the improved funding position of the 2020 valuation.

Sarah Pook: ‘USS made clear last week at the Joint Negotiating Committee that without the latest reforms we would not have seen such an improvement in the funding position, which remains very volatile month-to-month’.

Mike Otsuka: As Mark Taylor-Batty notes: “The growth of assets to circa £90bn, the fundamental aspect of the improved position, has nothing to do with the UUK proposal. The health of the scheme adds credibility and urgency to the UCU proposals.”

Sarah Pook: ‘The USS Trustee has made clear that without the reforms escalating contributions would be payable by both members and employers – and this would not change until a new valuation was concluded’.

Mike Otsuka: This is false. Even before a new valuation is concluded, it would be possible to cap the escalation in contributions, as spelled out by the third of UCU’s three proposals. See here for further explanation of how such a cap could be realised.

Sarah Pook: ‘Indeed, if the reforms were not made the USS Trustee’s February 2022 monitoring points to a future service rate of 40.7%, plus a deficit of £6.3bn to be addressed which requires further deficit contributions of between 4% and 6.2%’.

Mike Otsuka: Here your VC is running together two very different items under the heading of ‘reforms’: (i) UUK’s swingeing cuts to future accrual, and (ii) their commitment to repair the damage to the covenant caused by the exit of one of their members (Trinity College Cambridge) by such means as a 20 year commitment of all other employers not to exit the scheme. The figures quoted above are based on the assumption that employers fail to repair this damage but instead offer only minimal covenant support. Under UCU’s proposals, current benefits would be underpinned by these measures to repair the damage to the covenant – i.e., they would be underpinned by the same level of covenant support as employers are extending to their own cuts to benefits. With such comparable covenant support, USS has indicated that, as of 28th February, the cost of future service would be 38% (not 40.7%), the deficit would be £3.6bn (not £6.3bn), and required deficit recovery contributions would be as low as 0.9% (not 4%), where this lower rate would be achieved by means of reasonable assumptions regarding length of recovery plan and assumptions regarding returns on asset investment.

In short, this is further evidence that our employer is refusing to engage with UCU even when the situation has changed and even when UCU’s proposals represent the best option for securing benefits for members and protecting the long-term health of the scheme.

The only way for us to get any leverage to push back against these savage cuts to our pensions is to refuse to accept them.

Vote YES to Strike Action and YES to ASOS on USS.