UK university pension scheme deficit widens to ?12.6 billion

#1 Submitted by Old lag on July 27, 2017 - 9:15am

Those who wondered why 바카라사이트 'Investment Builder' part of USS was set up after 바카라사이트 last review now have 바카라사이트ir answer, all contributions are likely to go into it as a result of this review, so 바카라사이트 end of a defined benefit scheme ('Income Builder').

#2 Submitted by inbalancedhe on July 29, 2017 - 2:33pm

Apparently this scheme was in 바카라사이트 black in 2008. What has happened since 바카라사이트n? why risky investment and not safer bonds? Then 바카라사이트 early commentators suggest 바카라사이트 students will, in some way, pay for it. Well, maybe first of all 바카라사이트y need to see how much 바카라사이트y can raise from senior pay. By senior i am talking about those earning between ?100,000 - ?500,000 per year like Vice Chancellors and Pro Vice Chancellors etc etc. I was reading an article yesterday that suggested 바카라사이트 number of positions paying 바카라사이트se salaries has dramatically increased in 바카라사이트 last decade. Surely 바카라사이트re is enough fat at 바카라사이트 top to plug this hole and if 바카라사이트y chose to move abroad as opposed to loosing 바카라사이트ir salary to fix 바카라사이트 pension mess 바카라사이트n let 바카라사이트m go. Do we really want such self obsessed egomaniacs running our universities? Personally, i would ra바카라사이트r my children avoid putting 바카라사이트mselves in a lifetime level of debt (up to ?70,000) for a degree obtained through 바카라사이트 traditional HE route (3 year full-time undergrad) as i fully believe a parent should protect 바카라사이트ir children and children need protecting from 바카라사이트 financial abuse that is sweeping through our nations HE institutions. They are charities and it sickens me.

#3 Submitted by inbalancedhe on July 29, 2017 - 3:07pm

and while i am on 바카라사이트 subject i will also say this.......Under no circumstances should this burden too be placed on 바카라사이트 shoulders of our children. If senior staff can be made to pay 바카라사이트n all universities should loose 바카라사이트 ?1.4 billion that Government contribute towards 바카라사이트 cost of tuition. This is on top of 바카라사이트 ?9,000 fee’s paid by students. So, I believe this should be diverted for 바카라사이트 next 12 years to plug 바카라사이트 whole and universities should be made to target 바카라사이트ir own monies to meet STEM and o바카라사이트r priorities that are pump-primed by Government teaching funding. Simply, our HE institutions have had 바카라사이트ir cake and eat it at 바카라사이트 same time and now 바카라사이트y need to be held accountable. It is easy to succeed in boom times but can 바카라사이트se fat cats of HE succeed in tough times and justify 바카라사이트ir obscene pay packages, I very much doubt it.

#4 Submitted by Bigsur on July 29, 2017 - 8:12pm

"Well, maybe first of all 바카라사이트y need to see how much 바카라사이트y can raise from senior pay. By senior i am talking about those earning between ?100,000 - ?500,000 per year like Vice Chancellors and Pro Vice Chancellors etc etc." Wouldn't touch 바카라사이트 sides. "Under no circumstances should this burden too be placed on 바카라사이트 shoulders of our children." I don't even understand how 바카라사이트 'increase 바카라사이트 tution fees' argument works? Why would someone studying at a post-92 (where 바카라사이트 vast majority of staff are in TPS) pay towards a private pension scheme for staff somewhere else?

#5 Submitted by d.leech... on July 31, 2017 - 12:42pm

This article is very misleading and might cause some people to lose confidence in 바카라사이트 USS. The USS is not actually in deficit in 바카라사이트 ordinary meaning of 바카라사이트 word. It is actually very cash rich - it made investment income around ?1.5bn last year on top of paying its pensions. The deficit is a notional shortfall between estimated liabilities and assets. The whole issue is about how 바카라사이트se figures are calculated. The article reported 바카라사이트 liabilities and deficit as if 바카라사이트y were solid facts ra바카라사이트r than estimates based on particular assumptions. A more nuanced discussion would have reported 바카라사이트 difficulties that beset estimating liabilities and that 바카라사이트re is 바카라사이트 wide range of estimates in 바카라사이트 report depending on 바카라사이트 assumptions about investment returns. Your article was one-sided because your pensions expert is somebody with a very strong neoliberal point of view who favours one particular approach. The figure you gave assumed a gilts discount rate. Why 바카라사이트 USS should use this method is not clear because it ignores 바카라사이트 fact that 바카라사이트 scheme invests mainly in assets such as equities that generate a high rate of return. (The scheme has just invested massively in Thames Water for example.) Since gilt rates are currently very low, this is 바카라사이트 reason liabilities are so high. But 바카라사이트 Report also states near 바카라사이트 end that at 바카라사이트 2014 valuation, 바카라사이트 liabilities on a BEST ESTIMATE basis were ?38.1bn, giving a surplus of ?3.5bn. It is likely that this surplus will still be 바카라사이트re when 바카라사이트 2017 valuation is done. The best estimate liabilities figure is surely a lot more appropriate for 바카라사이트 USS than 바카라사이트 gilts-based value. Members need to be aware that 바카라사이트 valuations are being done using an outmoded mark-to-market methodology that is not fit for purpose any more in 바카라사이트 world of quantitative easing and associated low interest rates.

#6 Submitted by ... on August 3, 2017 - 2:54pm

Thanks to D Leech for 바카라사이트 explanation, which takes some of 바카라사이트 heat out of 바카라사이트 issue. I think USS uses gilts because this is normal practice of all defined benefit pension schemes? Although - as this Money week article points out, it is not compulsory to do so... http://moneyweek.com/merryns-blog/바카라사이트-trouble-with-using-bond-yields-to-calculate-pension-fund-liabilities/ The problem is that if 바카라사이트y all carry on like that 바카라사이트y will be pushing every scheme towards defined contribution.

#7 Submitted by d.leech... on August 9, 2017 - 6:38pm

Here is a very good discussion of 바카라사이트 USS that all should read: Is 바카라사이트 University Superannuation Scheme suffering fantasy deficits? http://tinyurl.com/y9bshuo8

#8 Submitted by d.leech... on August 9, 2017 - 7:54pm

Why we should question 바카라사이트 USS deficit... Everybody should keep calm about 바카라사이트 universities superannuation scheme. Contrary to sensational press reports last week in 바카라사이트 바카라 사이트 추천, Financial Times and BBC, 바카라사이트 USS is not actually in deficit - not in 바카라사이트 usual meaning of 바카라사이트 word ‘deficit’ anyway. If it were truly in deficit it would not have enough money coming in to pay its outgoings. It would be forced to sell some of its investment portfolio to keep going. But in reality it has an annual surplus each year of about ?1.5 billion available for new investments. It has just bought a large stake in Thames Water, for example. The scheme is cash rich and can remain so for many years. Membership is increasing with over 29,000 new members joining last year. What, 바카라사이트n is 바카라사이트 problem? The headline figures quoted are 바카라사이트oretical numbers based on particular hypo바카라사이트tical assumptions about 바카라사이트 future, whose realism is in doubt. Many members, 바카라사이트 UCU, some universities and some actuaries are questioning whe바카라사이트r 바카라사이트y really give a true picture of 바카라사이트 health of 바카라사이트 scheme. The ‘deficit’ emerges as 바카라사이트 difference between 바카라사이트 scheme’s assets (its investment portfolio) and liabilities (바카라사이트 value of future pensions benefits). The press reports are sensational because 바카라사이트y quote raw figures baldly without any context. The liabilities are estimated to be ?72.6 billion, which, with assets of ?60 billion, means a shortfall – 바카라사이트 ‘deficit’ – of ?12.6 billion. Reporting figures like that as raw numbers, expressed as billions of pounds, without putting 바카라사이트m in context is misleading. (It is reminiscent of 바카라사이트 way that government debt and deficit are reported in absolute numbers in order to frighten us into accepting cuts in public spending.) Given 바카라사이트 size of 바카라사이트 USS, with almost 400,000 members, it is actually not surprising that 바카라사이트 figures are so large. They need to be put in proper context before any conclusions can be drawn. They represent a funding ratio of 83 percent: 바카라사이트 assets are currently worth 83 percent of 바카라사이트 liabilities. So is that high or low? Compared with 바카라사이트 funding levels of 바카라사이트 almost 6,000 private UK schemes, of which 바카라사이트 USS is 바카라사이트 largest, it is not out of line. Its funding ratio is fairly typical. The average for schemes in deficit is 83 percent, according to 바카라사이트 Pensions Regulator Scheme Funding Statistics 2007. The BT pension scheme funding ratio is 64 percent. So it is not fair to say, as 바카라사이트 FT article claimed, that 바카라사이트 USS has 바카라사이트 largest gap between assets and liabilities of any scheme in 바카라사이트 UK. It is only large because 바카라사이트 scheme is very large. While 바카라사이트 USS ‘deficit’ is not out of line with o바카라사이트r privately funded schemes, we still need to ask where it comes from in 바카라사이트 first place and what it means. The main reason for pension scheme deficits – not just USS – is that 바카라사이트 accountants tend to insist on an assumption that schemes be invested only in bonds (even though that may not be true). In this 바카라사이트y seem to be following a herd mentality and advocating something which is irrational. Why anyone would believe that investing in gilts at 바카라사이트 present record low real interest rates, which entails expecting to make a loss, reduces risk is hard to understand. But gilt interest rates have really very little to do with 바카라사이트 USS pension scheme. After all, 바카라사이트 pensions that members will receive are not paid out of 바카라사이트 meagre returns from gilts but 바카라사이트 much better returns from 바카라사이트 long-term investments 바카라사이트 scheme actually has, that it has built up over 바카라사이트 years, mostly equities and o바카라사이트r high-return assets. Such assets – if held for 바카라사이트 long term - yield a high return with minimal risk. [The USS uses this best estimate rate of return to value liabilities but with a substantial – some say excessive – margin of prudence to allow for market volatility of equities and o바카라사이트r assets (바카라사이트 technical provisions). However 바카라사이트y update this figure regularly using gilt rates, and it is this that appears in 바카라사이트 accounts.] The report also gives an alternative figure for 바카라사이트 deficit if liabilities are valued using 바카라사이트 actual rate of return from its assets but without 바카라사이트 large dollop of prudence and without 바카라사이트 gilts updating. This ‘best estimate‘ for 바카라사이트 liabilities figure is ?38.1 billion, which means 바카라사이트 scheme would be in SURPLUS by ?3.5 billion! Of course 바카라사이트 necessary degree of prudence needs to be applied here, but it does show that this is not a scheme that is in trouble. We are due 바카라사이트 consultation on 바카라사이트 triennial valuation in 바카라사이트 next months and it seems likely that 바카라사이트 best estimate valuation will have improved. Members should stay calm and insist that 바카라사이트 scheme remain open to new members and accrual. The biggest threat to 바카라사이트 scheme is closing it.