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Open letter from Academics for Pensions Justice

Number 26: #USSbriefs26

Academics for Pensions Justice

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This is a USSbrief that belongs to the OpenUPP (Open USS Pension Panel) series, and has been submitted to the UCU-UUK JEP (Joint Expert Panel).

4 July 2018

Dear members of the Joint Expert Panel and the USS Board of Trustees

The undersigned act as the ‘Academics for Pensions Justice’ and are the leads of the Fighting for Pensions Justice in UK Higher Education Crowd Justice campaign. This campaign raised £50,000 through donations by 2,000 USS members, with the express purpose of providing the funds for qualified lawyers to evaluate the potential liability of the Board of Trustees of the Universities Superannuation Scheme Ltd (USSL) in relation to their management of the pension scheme.

The purpose of this letter, addressed to the members of the Joint Expert Panel (JEP) and the Board of Trustees of USSL — but open to the widest audience including USS beneficiaries and stakeholders — is to demand that USSL provides full disclosure of the data, assumptions and modelling approach underpinning the 2017 valuation to the JEP.

Full disclosure is both urgent and necessary. Part of our work in Fighting for Pensions Justice in UK Higher Education has involved us asking USSL directly for this information. While USSL has released a few additional documents in response, which are currently available at, it has explicitly denied us access to the information we sought. In doing so, it has refused to disclose information that we and others maintain is needed for an independent and rigorous review of the 2017 valuation. Nevertheless, USSL continues to insist that the information it has now provided is adequate for all purposes. On 26 April 2018, USSL’s lawyers wrote to us saying that, ‘the information already provided is sufficient for a competent actuary and legal adviser together to substantiate that our client has taken and is taking a thoroughly proper approach to its obligations under both the USS Rules and legislation’. We disagree.

As we highlight below, while USSL has denied us access to information that is needed for independent oversight and scrutiny of the management of USS, our concern at this stage is that the same information will be critically necessary for the JEP to perform its work. It is this concern that prompts us to write — because we anticipate that USSL will also deny the JEP access to this critical information, unless steps are taken to demand full disclosure from USSL.

1. The JEP needs to cut new ground: Full disclosure is key to this

We are extremely supportive of the JEP and regard its work as critical and urgent. We note in particular the intention of the JEP, under its terms of reference, to review ‘the basis of the scheme valuation, assumptions and associated tests (paragraph 4 of the Acas agreement)’. What we cannot identify however, is how that review is to be undertaken and in particular, the range of information that will be furnished to support it. The Report on the second and third meetings of the JEP from the chair of the JEP highlights that ‘the JEP has received a commitment from USS that it will provide the Panel with the information it needs to undertake its analysis and to fulfil its Terms of Reference’. This is too vague. There is nothing to suggest either there, or in the most recent report from the Chair of the JEP (22 June 2018), that USSL has made a commitment to full disclosure to the JEP.

For us, this step is now critical and the only means by which to ensure that the JEP meets the expectations of USS members.

Our concern is that in the absence of full disclosure on the part of USSL to the JEP, the JEP’s ‘review’ will then be conducted by reference to documentation that USSL has already made available in the public domain. If that is the case, then this points to a very limited concept of ‘review’, and one that will result in the JEP falling short of its aims. Numerous prior ‘reviews’ of the USS valuation have taken place already, yet the same concerns around the management of USS persist. USS members are aware that a Valuation Discussion Forum was established following an agreement between University and College Union (UCU) and Universities UK (UUK) in 2015. As one higher education commentator notes, that Forum had a very similar remit, but ‘achieved absolutely nothing’. For good reason, there are some that are concerned that the JEP might be forced to follow suit.

There is widespread knowledge of the First Actuarial report (September 2017) — in essence a ‘review’ of the 2017 valuation — which was commissioned by UCU. Similarly, there are now myriad reports and work available online, produced by financial experts and actuarial scientists who have sought to ensure that USS members are alert to the variety of concerns surrounding the assumptions and methodology underpinning USS valuations. All of these constitute ‘reviews’ of the ‘basis of the scheme valuation, assumptions and associated tests’. Nevertheless, the kind of review that we expect of the JEP must — particularly in light of the above — be different. We do not expect the JEP to have to engage in ‘reverse engineering’ to identify the assumptions and models underpinning the 2017 valuation — even if this has been necessary for those undertaking prior reviews in the absence of full disclosure. As we highlight below, financial experts have explicitly pointed to this as a particular concern, noting that the information made available by USSL is simply insufficient. Our concern here, is that while independent reviews of the valuation to date have had to proceed on that basis, the Joint Expert Panel should not have to proceed with its review in the absence of full disclosure. At this stage, USS members can rightly expect the JEP to cut new ground, and for USSL to take the necessary steps to facilitate this.

We cannot put this strongly enough: it is our belief that a continued failure on the part of USSL to provide full disclosure will not only fatally undermine the work that the Joint Expert Panel has sought to undertake, but will constitute a serious breach of USS members’ trust insofar as members were led to believe that the Joint Expert Panel was established to ensure that the 2017 valuation would be subject to a full, rigorous and independent review. If the 2017 valuation process has been ‘thorough, rigorous and comprehensive’ as Bill Galvin, the Group Chief Executive Officer of USSL, maintains, USSL should welcome the opportunity to provide full disclosure to the JEP.

What USS members now seek is a resolution of this matter via a rigorous and independent review and anything short of full disclosure will not do. For this reason, we ask that USSL provides full disclosure of the data, assumptions and modelling approach underpinning the 2017 valuation, and that the Joint Expert Panel demands it.

2. Will USSL provide full disclosure? Our concerns

We have sought to make this an open letter because we are not confident that in the absence of publicity, that the Joint Expert Panel will be provided with full disclosure of the information by USSL. This is for two reasons.

Firstly, the concerns around USS valuation methodology and the lack of transparency in respect of the underpinnings of the valuation are long-standing and so serious that they should have prompted USSL and the Pensions Regulator to provide full disclosure of the data, assumptions and modelling approach relating to the valuation long ago. In response to the 2014 valuation a group of statisticians and actuaries raised serious concerns about the USS valuation methodology. In September 2017, the Working Party on Pension Valuation, Imperial College London raised concerns about whether the 2017 USS valuation meets Technical Actuarial Standard (TAS) 100 and suggested that it was ‘very hard for an expert to make any assessment of the methodology and of the outputs’. Actuaries, economists and statisticians in the Higher Education sector raised similar concerns in a letter to the Financial Times. Each of these responses not only highlights substantive concerns about the valuation itself, but also makes the case that a ‘lack of transparency’ on the part of USS is a key problem. Despite dating back to 2014, these concerns remain unaddressed. In September 2017 the Pensions Regulator wrote: ‘However, the methodology used by the Trustee is undoubtedly complex, with many constituent parts, and this leads to a number of challenges, not the least of which is its communication’. And ‘the trustee’s stochastic model is very sensitive to the input assumptions’. Despite all of these concerns, USSL did not act — and to the best of our knowledge, still has not acted — in order to make sufficient information available about its analysis and models.

USSL must now act. There is a clear expectation on the part of USS members and by UUK that the JEP will ensure transparency in respect of the 2017 valuation. In response to the news of the establishment of the JEP in April 2018, a spokesperson for UUK stated: ‘Reviewing the methodology and assumptions in the current valuation will build confidence, trust and increase transparency in the valuation process. It will provide an opportunity to consider the questions raised about the valuation by scheme members and employers. It is important that interested parties engage with the panel and remain open-minded about its possible findings’.

Secondly, we are concerned that USSL will refuse full disclosure to the JEP on technical grounds. In April 2018, acting in our capacity as the ‘Academics for Pensions Justice’ on behalf of thousands of USS beneficiaries, we sought full disclosure of this information as ‘users’ under the TAS 100 and 300. The responses we received from USSL, and separately, the Financial Regulation Council (FRC) advised us that even as a wide community of beneficiaries that we are not ‘users’, and that USSL is not, in any event subject to regulatory oversight by the FRC. As such, our request for broader information that proves critical for a full and rigorous review of the valuation, was flatly refused. What is most important to note here is that in the course of that communication, the question of which parties are entitled to full disclosure has been more fully illuminated. Based on these communications (letter from USSL’s lawyers on 26 April 2018), what became clear is that the ‘users’ who can seek full disclosure of that information under TAS is narrowly interpreted by USSL and the FRC as being limited to the USS Board of Trustees itself, which employs the USS actuary responsible for the 2017 valuation.

This interpretation presents us with the extraordinary situation that the only party permitted to fully scrutinise the data, assumptions and modelling approach underpinning the 2017 valuation, is the USS Board of Trustees itself (and this assumes that the members of the Board of Trustees possess the expertise to do so). Other parties are technically denied full scrutiny of the USS valuation, including not only USS members but even the JEP itself. But this also highlights the presence of a serious potential conflict of interest which needs urgently addressing. In light of financial experts highlighting serious concerns about actuarial standards in respect of the USS valuation, there is a clear need for closer scrutiny and oversight to ensure that USSL is maintaining rigorous actuarial standards and fulfilling its legal duties to its beneficiaries and stakeholders. If, as has been claimed, there are errors in respect of aspects of the valuation methodology, given the weighty decisions that are made as a result of these triennial valuations (e.g. closure of the final salary scheme, proposals to close the Defined Benefit element of the scheme) and the enormous impact upon USS members’ financial futures, it is critical that there are effective mechanisms by which to bring such errors — should they exist — to light. At present, we are concerned that no such mechanisms are in place. Moreover, we believe that there is a real risk that USSL, despite its duties to its beneficiaries, will maintain the utmost secrecy around all of these elements. Indications are, that in the absence of full co-operation by USSL with the Joint Expert Panel, that the Joint Expert Panel will also be denied full disclosure of the information necessary to undertake a rigorous and thorough review of the 2017 valuation.

In summary, our letter asks for two things. We firstly call upon USSL to provide a firm commitment to the JEP to provide it with full disclosure of the data, assumptions and modelling underpinning the 2017 USS valuation. Secondly, we ask the Joint Expert Panel to confirm, in the form of a public statement, when, and if, full disclosure of the data, assumptions and modelling underpinning the 2017 valuation has been provided by USSL.

Yours faithfully

Prof Nicky Priaulx
Dr Ruth Stirton
Prof Lindsay Stirton
Prof TT Arvind
Prof Alastair Hudson

Academics for Pensions Justice

This is a USSbrief that belongs to the OpenUPP (Open USS Pension Panel) series, and has been submitted to the UCU-UUK JEP (Joint Expert Panel). This letter represents the views of the authors only. The authors believe all information to be reliable and accurate; if any errors are found please contact us so that we can correct them. We welcome discussion of the points raised and suggest that discussants use Twitter with the hashtags #USSbriefs26 and #OpenUPP2018; the authors will try to respond as appropriate. This work is published under a Creative Commons Copyright Waiver.

 by the author.




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Academics for Pensions Justice

Academics for Pensions Justice

Academics for Pensions Justice is an unincorporated association, led by Ruth Stirton, Nicky Priaulx, Lindsay Stirton, T.T. Arvind and Alastair Hudson.

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