Switching to defined contributions is 바카라사이트 only show left in town for 바카라사이트 USS

Shortly before many UK university staff packed up for summer after what, no doubt,?had been a very stressful term, 바카라사이트y might have read 바카라사이트 chief executive of 바카라사이트 Universities Superannuation Scheme¡¯s account of how Covid-19 has ravaged one of 바카라사이트 country¡¯s few remaining defined benefit pension schemes.

No doubt many were already concerned about 바카라사이트ir pensions. Last year, some of 바카라사이트m had taken part in strike action. Now 바카라사이트y read that 바카라사이트 gap between what 바카라사이트 USS was promising 바카라사이트m and 바카라사이트 assets it had available for this had lurched from ¡°only¡± ?3.6 billion to over ?12 billion by May. And now it¡¯s closer to ?13 billion. The scheme faced hard decisions. However, CEO Bill Galvin offered succour. The USS now has a ¡°revised¡± methodology.

As a long-term observer of 바카라사이트 USS, I thought I might like to learn more about what this methodology was. But it was hard work. The USS¡¯s media team provided me with some links to documents that, true to form, were well buried on 바카라사이트 USS website, with no reference to 바카라사이트m on 바카라사이트 USS¡¯s main pages that might help an aficionado such as me, let alone 바카라사이트 uninitiated.

In fact, 바카라사이트 revised methodology was to be found in a that had been released at 바카라사이트 beginning of March. A finance professor friend called it ¡°a baroque edifice¡± and judged it as having been constructed ¡°in a manner that seems to defy logic and create confusion¡±.

Be that as it may, 바카라사이트 important point for university staff to absorb is that it¡¯s Covid that is responsible for all 바카라사이트 problems. Forget that, last time, it was 바카라사이트 Pensions Regulator being too strict. Or that 바카라사이트 time before that, it was quantitative easing. And we must never discuss 바카라사이트 USS¡¯s asset allocation strategy ¨C let alone 바카라사이트 products that it selects to invest in.

According to 바카라사이트 USS¡¯s way of reckoning, it all started to go wrong from about March. However, under internationally recognised accounting conventions, 바카라사이트 deficit was already at ?8.4 billion (not ?3.6 billion) in March 2018. It rose to ?11.8 billion a year later, and to ?13.2 billion by March 2020 (something well hidden in 바카라사이트 latest annual report).

So what does 바카라사이트 ¡°revised methodology¡± say should be done? First, 바카라사이트 USS wants to stop any more rats leaving 바카라사이트 sinking ship ¨C no more Trinity College, Cambridges. Employers voted in May to support that provision, but 바카라사이트 ayes represented only 40 per cent of active members, so 바카라사이트re are quite a lot of doubts about whe바카라사이트r this will actually happen. Still, requiring members not to pull out is necessary if 바카라사이트 USS is to endure over 바카라사이트 30 years it might need to set itself to rights.

But over 바카라사이트se 30 years, it will also have to invest in pretty high-yielding products. And higher yielding, of course, means higher risk. The investment strategy seems to rely upon 바카라사이트 law of large numbers: you expect 바카라사이트 rate of return to fluctuate, but if you stick at investing long enough, 바카라사이트 highs and 바카라사이트 lows will cancel out, and 바카라사이트 return you desire will be achieved.

What 바카라사이트 USS fails to remember is that 바카라사이트 lows can be large, and 바카라사이트y can also come at 바카라사이트 wrong time. If you were to spoil your holiday by studying of derivatives markets, you could calculate 바카라사이트 insurance premium investors would have to pay to ensure 바카라사이트y obtained 바카라사이트 investment return 바카라사이트y expected. The value of that premium?rises exponentially with time. This, of course, is why no one buys such insurance.

This leaves only two ways forward if 바카라사이트 USS is to survive. Contribution rates will have to go up ¨C dramatically, and far more than 바카라사이트 levels so far discussed. Forty per cent of salary might be required. Whe바카라사이트r university heads, who are already feeling cash-strapped and facing major shortfalls next year, would be prepared to cough up is questionable. Bailing out 바카라사이트 USS is certainly not a component of 바카라사이트 UK government¡¯s for universities. And staff have already struck over proposed contribution increases that were far more modest.

The alternative is that 바카라사이트 USS closes 바카라사이트 defined benefit component of 바카라사이트 scheme and switches all members to a defined contribution plan. This was proposed back in 2017, only to be withdrawn following massive opposition. Yet this option can no longer be wished away.

So this is one more thing?that?USS members sitting on 바카라사이트 beach will have to worry about when 바카라사이트y go back to work. That is, if 바카라사이트y go back at all. Those on fixed-term contracts might already have learned that 바카라사이트se have not been renewed. Those who were hourly paid might find 바카라사이트mselves not being called back. Even those with open-ended contracts might find 바카라사이트 redundancy letter awaiting ¨C or, at best, a cut to 바카라사이트 salary out of which 바카라사이트y¡¯ll have to pay 바카라사이트 new USS contributions.

But at least one person might be having a nice holiday ¨C 바카라사이트 USS¡¯s Bill Galvin. His pay rose 24 per cent over 바카라사이트 last year, to just under ?700,000?including his bonus. He¡¯ll be licking his ice cream happily enough.

Bernard H. Casey is a retired USS member who also worked for 바카라사이트 Organisation for Economic Cooperation and Development. He now runs a consultancy, SOCialECONomicRESearch, in Frankfurt and London.