On the go: The Universities Superannuation Scheme trustee has issued an update on scheme finances, and expressed its concern that previous use of monitoring statements by parties involved in the ongoing 2020 valuation dispute could be “misleading” members about the true state of the scheme.
The University and College Union has made use of monitoring statements to argue for a new consultation, which it said would prove planned cuts to the scheme resulting from the 2020 valuation were unnecessary.
On March 31, the union pointed to one such statement appearing to show that assets had exceeded their pre-pandemic performance, that growth had outstripped liabilities, and that the level of contributions required to service the debt had fallen to 0 per cent.
UCU general secretary Jo Grady used the report as the basis for a letter to the chief executive of employer group Universities UK, calling on employers to reverse cuts to member benefits that the union alleges will amount to 35 per cent for a “typical lecturer”, though UUK disputes this figure.
She also called on employers to back UCU’s alternative solution, which would include a new valuation, a short-term increase in contributions to allow negotiations to take place, employers pledging the same level of covenant support they gave to their own proposals, and a guarantee that contributions would not exceed 25.2 per cent for employers and 9.8 per cent for members.
On April 4, however, the USS trustee released an update on the financial position of the scheme and took care to explain that its monitoring statements “are not a predictor of the likely outcome of a valuation”.
Though the value of the schemes assets as of February 28 had risen to £88.8bn and the indicative contribution rate had indeed fallen, the trustee explained that markets remain volatile and the positive recent indicators should be viewed in the context of a pre-Christmas period that was more negative.
Its report also explained that the cost of retaining the scheme’s existing benefit structure without the covenant support measures pledged by employers as part of their 2020 valuation proposals would be significant. As of the end of February, the indicative required contribution rates without the employers’ support package would have been between 44.7 and 46.9 per cent.
The future service cost would be 40.6 per cent and the deficit £6.3bn.
Even with the employers support measures in place, the cost of retaining the old benefit structure would likewise have been significant — the indicative contribution rate being between 38.9 and 41.5 per cent, with a future service cost of 38 per cent and a deficit of £3.6bn.
“These contribution rates are still well above the current contribution rate being paid (31.4 per cent) and illustrate the extent to which the scheme’s revised benefit structure is limiting the impact of higher-than-expected inflation and a reduced outlook for future investment returns,” the trustee explained.
“This information has been shared with, and explained to, our stakeholders. The trustee is concerned that the information contained in the monitoring statements is being used to draw conclusions that are not warranted by the nature and context of the information.
“Definitive statements are being made without the full context and caveats to the metrics illustrated, which could well be misleading to members.”
