The Newsnight programme which aired on Thursday 24 October featured a piece on USS and in particular on its funding position. This has been followed up by a number of media outlets and there are aspects of the coverage which require clarification and in some cases correction, which are briefly set out below. A fuller response to these issues will be communicated to all USS institutions in the coming days, together with an accompanying update for members. Members can be reassured that the pension benefits they have already accrued are secure.
- The trustee company provides very full information to members and institutions on an annual basis regarding scheme funding, using a range of funding bases. These include (i) principally, our funding target basis (what we sometimes refer to as the formal technical provisions basis), (ii) a gilts basis, a reference point which have used for many years, and (iii) a full ‘buy-out' basis to give a measure if what it would cost to buy out the benefits with an insurance company if that were possible. In addition, employers are informed on an annual basis of the funding position on the accounting, FRS17, basis.
- Working with employers and members representatives, the trustee board has previously taken steps to deal with scheme funding pressures; in recent years changes have been made to both employer and employee contribution rates, and indeed to future service benefits.
- The employer and member representatives have recently reaffirmed their commitment to working together – alongside the trustee board – to meet the current scheme funding challenges as we look ahead to the 2014 actuarial valuation.
- These are important judgments for trustees, employers and member representatives; the process sensibly takes time, as the requirement is to make sensible decisions on a long-term basis. Because of the nature of the subject, it attracts attention, and speculation. The trustees have started the process of engaging with employers and stakeholders on these issues, and we will be working through to the right answer as we prepare for the 2014 valuation.
- We would reiterate that USS is a long term investor, and unlike many defined benefit schemes it remains open to new members and is cash positive. Assets are performing well, in the year to March 2013 the investment team outperformed independently set, industry wide benchmarks. Global economic uncertainties have meant that the value currently placed on the liabilities has increased substantially since the last valuation. However, USS is able to take a long term view, and the substantial and enduring strength of the sponsoring employers, means we are able to adopt an investment strategy which can take advantage of the longer term growth opportunities in specific asset classes.