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Open letter to UUK regarding USS valuations

Number 80: #USSbriefs80

Jane Hutton, University of Warwick

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This is a USSbrief, published on 9 September 2019, that belongs to the OpenUPP (Open USS Pension Panel) series.

[Editorial note: this open letter was first published on Jane Hutton’s website at the University of Warwick.]

Dear Principals, Vice-Chancellors, Finance Directors

I am writing to you as a Non-Executive Director of the USS Board. I was appointed because I am an expert statistician, with international recognition, and a Professor of Statistics at the University of Warwick. I am concerned that universities are being asked by USS to pay unnecessary monies to address a deficit in the pension scheme, which has not been calculated correctly. My requests to the USS Board for the information which would enable me to evaluate my belief have been denied. The purpose of this letter is to ask you to support my request for this information.

The USS Board has asked the university sector for an additional contribution of £0.75 billion per year to meet an deficit which they estimated in 2017 of £7.5 billion. In 2018, USS revised the estimated deficit down to £3.6 billion, but are continuing to ask for the same additional contribution of £0.75 billion per year. In order to fulfil my duty as a director, I have requested information which would allow me to evaluate whether the assumptions and models used for the calculations by the USS Board are valid.

If I am correct, universities are being asked to find £0.75 billion per year to address a deficit which has been overestimated. It is a matter of the utmost importance that universities do not divert money needed for research and teaching to meet a deficit calculated by faulty models. My aim is to secure an accurate valuation of USS. My belief that the models are faulty is supported by the report of the Joint Expert Panel set up by UUK and UCU. USS proposed a contribution of 36.6%. The Joint Expert Panel, however, concluded that a contribution of 29.2%, would make the risk of deficit negligible.

I have repeatedly been denied the information I requested. I have in fact been suspended from the USS Board without proper explanation; I can only assume that the suspension arises from my persistence in seeking the necessary information.

As you will appreciate, risk assessment is a critical element of the models used in the calculation. Dissatisfaction with the USS Board’s approach to risk assessment is underlined by the Prof Sir David Spiegelhalter [1] and 1017 other academics in a letter to the Financial Times which includes the following:

We believe the conduct of USS valuation over the past two years has brought the scheme into disrepute. An inquiry is urgently needed to obtain the necessary information to assess the USS’s claims, review the conduct of the USS executive, trustees and the Pensions Regulator, and ultimately to rebuild members’ and employers’ trust and confidence in the scheme. It would be appropriate for a select committee of parliament to investigate.

The matter cannot be resolved satisfactorily by suspending a director who is simply asking questions to elicit information on behalf of stakeholders. If all the assumptions and models used by USS are correct, why would the Board deny a director access to the information? Surely demonstrating that the results are correct on the basis of public access to the information would settle the matter definitively.

In view of this and the unnecessary burden which has been placed on University funding I am writing to ask you to demand access to the information which I have requested over the last 2 years.

Yours sincerely

Jane Hutton

Professor J L Hutton
Department of Statistics
University of Warwick
Coventry CV4 7AL

[1] Prof Sir David Spiegelhalter is the Winton Professor for the Public Understanding of Risk, University of Cambridge.

This is a USSbrief, published on 9 September 2019, that belongs to the OpenUPP (Open USS Pension Panel) series. This letter represents the views of the author only. The author believes 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 #USSbriefs80 and #OpenUPP2018; the author will try to respond as appropriate. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.



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