In September I took over as Chair of USS during an extraordinary time for the scheme. Not only in the midst of a valuation, but also sharply aware of the unprecedented pressure on Higher Education from the pandemic. It was certainly not an ideal backdrop.
Even with this far from easy beginning, I have no regrets about undertaking this role because I believe in the values USS has, and recognise the vital importance of the sector it serves. USS is important to Higher Education, providing a worthwhile benefit which helps attract and retain talent. That in turn is crucial to the teaching and research excellence that is such a strength of the UK, developing tomorrow’s leaders and our economic future.
But as someone who has considerable pension trustee experience, as well as having worked with a range of universities, I know that the issues we face through the valuation are complex.
Lower interest rates (and longer life expectancy) have remorselessly pushed up the cost of providing pension benefits. And the current system is already not working as well as it should for younger potential members - some find the current levels of employee contributions difficult to afford. They are losing out on provision for their futures, and that can’t be right.
I know from work with the Resolution Foundation’s Intergenerational Commission that while auto enrolment has helped some parts of society have a financial cushion for old age, the young are increasingly missing out on the gains available to older generations.
Even with all of these competing forces in mind, there are reasons for optimism. We have in USS a strong Trustee full of people who are committed to the purpose of USS. As I get to know the people behind the name, it has become clear just how much all those who work here truly want to do the very best they can for members.
We are fortunate not only to have a fantastic team in pensions administration, but also a highly-skilled investment function who only have one client – the pension scheme, and where responsible investment increasingly runs through all that it does. I myself am a strong advocate for ESG and developing the principles that drive USS’s investing was another real attraction to me.
Despite these many positive attributes, the pandemic has knocked any aspirations of a straightforward valuation process out of shape.
The economic shock from coronavirus may ultimately prove a fairly short-term impact, but the medium-term effect on universities is difficult to predict, particularly as our employee sponsors are so many and varied. It is incredibly important that, despite their immediate problems, the employers are prepared to commit to the covenant support we have asked for. Covid-19 has exacerbated the trend for defined benefits to become much more expensive to fund – and we need to be sure that the employers stand four-square behind the scheme.
While the context may have become more challenging and more uncertain, I see in USS a team that wants to do the best it can for the sector. None of us underestimates the scale of the issues to be resolved in this valuation, but we have many talented professionals wanting to do their bit towards a positive outcome and I will do my very best to support this.