The outcome of the USS 2018 valuation

A statement from Jo Grady and Sam Marsh, University of Sheffield

Jo Grady, University of Sheffield
Sam Marsh, University of Sheffield

Monday 13 May 2019

Last week, USS announced the long-awaited and significantly delayed outcome of their 2018 valuation. Having filed the 2017 valuation unamended from that which caused unprecedented industrial action in higher education (and, in doing so, fixing contribution rates which will spiral upwards to dizzying levels by April 2020), the new one was billed as a way to intercept the worst of the damage before it arrived. Crucially, it was indicated that a new valuation would allow the recommendations from the Joint Expert Panel to be taken into account, particularly with regards the appropriate levels of investment risk.

Hopes of a new approach were dashed by USS’s announcement, which showed they have failed to take on board any of the criticism made by the panel in their valuation approach. Their headline total contribution rate is lower than previously planned (33.7% vs 35.6%), but this is due to updated market and longevity expectations as at March 2018. The underlying methodology and input parameters used to generate their headline figures are completely unaffected by the Joint Expert Panel’s comments.

Let’s look at what might have been. The panel’s recommendations applied to the 2017 valuation allowed for a total contribution rate of 29.2%, above the initial 26% but close enough to allow discussions which may have ended the dispute still hanging over the sector. The same recommendations applied to the 2018 valuation would have brought the rate tumbling to 25.5%, within the long-standing union position of ‘no detriment and no deficit’. This latter fact was revealed to employer and union representatives on the Joint Negotiating Committee by USS themselves back in the autumn, a significant factor in the decision to proceed with a new valuation. With retrospect, this now looks like a classic ‘bait and switch’ sales pitch.

If you find this hard to stomach, you’re not alone. So do we. Confidence in the administration of the scheme is tumbling among members and employers alike. Responses to questions raised by the latter are treated with the same contempt and unquantified spin that was previously reserved for former. Moreover, USS continue to suppress data and analysis which shows the shaky ground on which their valuation is based. USS’s chief executive is paid well over £600,000 to run the scheme on behalf of its stakeholders, yet is tone-deaf to the situation and unwilling to engage in a meaningful way with well-founded concerns and criticisms.

The Joint Expert Panel has embarked on their second phase which will, among other things, report on scheme governance. We have faith in the professionalism and expertise of our UCU and UUK colleagues on the JEP and suspect that their report will expose a rotten core at USS, along with proposals for the reforms necessary to regain the trust of those the scheme serves. If the panel doesn’t feel it has the authority to deal with the scale of the problem, a full inquiry with sufficient stature should be commissioned by the scheme’s stakeholders.

Back to the 2018 valuation, and it is our opinion that USS have attempted to deflect attention from their intransigence with an option to reduce the contributions in years 1 and 2 (30.7%) in exchange for an even higher rate (34.7%) in Years 3 onwards, alongside a commitment to a 2020 valuation which could intercept the higher increases. We are wary of this option. Preparation for that valuation would begin very soon after the 2018 one is filed, and certainly by March next year, leaving worryingly little time for proposals from the Joint Expert Panel to be discussed let alone implemented. Such an option risks repeating the unsatisfactory position we now find ourselves in. If USS resist changes to governance or methodology, we could be looking at another huge flare-up in not much more than a year when the draft 2020 valuation appears.

The approach that USS have taken means that we are as far away as ever from putting this dispute behind us. USS have moved little from where they were before the strike: we simply have old wine in new bottles. Accepting one of the options presented is at best an expensive sticking plaster, and at worst validation of USS’s world-view which will make future progress even harder and will almost certainly contribute to the further managed decline of the value of our pension. It is time for employers, who behind closed doors will express exasperation at how USS is being run, to speak up publicly about their loss of confidence before this dispute becomes even harder to resolve.