Motion received for discussion
Questioning Valuation Assumptions
“The single biggest issue is how divorced from reality the valuation is. Personally, I don’t think the valuation should be used for any decisions about the future of USS, contributions or benefits because it is so fundamentally unfit for purpose. There is no funding crisis with USS – this is a politically and idealogically motivated attack and the valuation is the weapon being used to attack it.
For those who haven’t followed things closely, it’s worth reading this USSbrief and examining the chart therein.
At every 3-year valuation since 2011, assets have grown vastly outstripping the “prudent” forecast made, and at each successive valuation having failed to kill off our defined benefit scheme, the valuation has predicted successively worse asset growth. This is taken to the extreme by the 2020 valuation “prudent” forecast – it would be a joke except this is the basis on which the future of our pension is decided.
I don’t think we should be considering CDCs, contribution rises, benefit reductions, changes for new entrants etc, until the serious issues with the valuation are fixed. Any researcher whose models were this bad would be a laughing stock.
The calculation assumes assets grow *only* with inflation. Note that salary and years of service scale away.
The fundamental problem therefore is that the USS valuation assumes that it cannot get *only* inflationary returns on a multi-billion pound pool of assets.
In some sense, *that* is the only calculation that matters – are contributions sufficient to pay for benefits at that individual level? Note that the 19.5 years retirement income more than covers the current life expectancy for USS members and retirement age.”
Universities UK (UUK) has launched a consultation of employers proposing very significant cuts to the defined benefit element of USS. The consultation runs until 24 May and this emergency branch meeting is called to discuss and provide advice for best approaching the staff survey (with deadline of 30th of April), and what can be done in that period to start building our campaign to resist those cuts and secure the future of USS.
Please see this UCU overview of the current USS situation. It sets out what is happening and outlines the approach which the UCU superannuation working group (SWG) is taking to negotiations. As the overview explains in more detail, UUK has issued a template survey for employers to give their staff during the consultation window.
UUK is trying to steal a march on UCU’s role as the member representative, and build a spurious consensus for its proposals to create a poor-quality DC alternative aimed at low paid staff – all while not coming clean with staff about its proposals to cut defined benefits.
The SWG has outlined five broad principles for securing the future of USS, which are explained more fully in the overview:
- Progressive contribution structures to enable more low paid staff to join and stay in USS.
- An end to the downward spiral of contribution increases and cuts to retirement income.
- The fund weighted towards return-seeking, ethical investments.
- Commitments from employers on covenant support, governance reform, and lobbying for regulatory change.
- Exploration of conditional benefits on terms acceptable to UCU members.
In a nutshell
In response to the recent 2020 USS valuation, UUK are proposing an attack on pensions (timed when members are reeling from the toll of the pandemic). Under this proposal, the benefits which members have already accrued are protected but for future service, UUK is proposing to:
• lower the salary threshold where defined benefit (DB) accrual stops from £59,883.65 to £40,000
• reduce accrual (and therefore the size of payments in retirement) from 1/75 to 1/85.
• impose a CPI indexation cap of 2.5% (removing the protection of benefits against any inflation above that level)
• keep the contribution rate as it is now (9.6% for members, 21.1% for employers).
It is similar to the offer made by employers via ACAS midway through the 2018 industrial action – but this new proposal is worse.
UCU will continue to question the 2020 valuation, and take steps they are taking, in order to protect members pensions.