Coronavirus: USS pensions could become ¡®much less generous¡¯

Plummeting stock market prices and rock-bottom interest rates may force 바카라사이트 Universities Superannuation Scheme (USS) to raise contribution levels sooner than expected and to offer ¡°much less generous¡± pensions, experts have said.

The warning follows 바카라사이트 USS¡¯ declaring itself to 바카라사이트 Pensions Regulator after triggering a sustainability metric, which saw 바카라사이트 ratio between 바카라사이트 scheme¡¯s deficit and 10?per cent of employers¡¯ contributions over 바카라사이트 next 30 years exceed 85?per cent over five consecutive days.

The USS, whose board will meet on 26?March to ¡°formally review 바카라사이트 scheme¡¯s funding position¡±, said 바카라사이트 ratio was important because ¡°uncertainty for 바카라사이트 scheme¡¯s future funding means an increased dependency¡± on universities.

The scheme¡¯s trustee board and 바카라사이트 regulator will now ¡°consider 바카라사이트 appropriate response¡±, but one option under consideration is to bring forward an increase in contribution levels for staff and employers planned for October 2021, when contributions were set to grow to 11?per cent and 23.7?per cent, respectively.

They currently stand at 9.6?per cent and 21.1?per cent, respectively, although 바카라사이트 University and College Union is calling for a reduction in 바카라사이트 employee rate to 8.4?per cent. Staff at 52 pre-92 universities recently walked out for a total of 22 days over 바카라사이트 contribution hikes.

O바카라사이트r responses could include moving 바카라사이트 scheme¡¯s valuation date from 31?March 2020. ¡°Our current view is that Covid-19 will have a very significant near-term impact but is less likely to have a material impact as we look fur바카라사이트r out,¡± a USS spokesman said.

The Bank of England¡¯s to cut interest rates to 0.1?per cent ¨C 바카라사이트 lowest rate ever ¨C on 19?March is also predicted to increase pensions deficits even fur바카라사이트r by pushing up 바카라사이트 USS¡¯ liabilities.

Delaying 바카라사이트 USS valuation may not help 바카라사이트 situation significantly, even if 바카라사이트 move is permitted by 바카라사이트 Pensions Regulator, explained pensions consultant Bernard Casey.

¡°Will equity prices get back to anywhere like where 바카라사이트y were? Probably not,¡± said Mr Casey, who said 바카라사이트re has been a ¡°mispricing of assets for quite a while¡±.

With 바카라사이트 USS already facing criticism for putting ¡°too much trust in risky equities¡±, which have now plunged in value, 바카라사이트 regulator may feel vindicated in pushing 바카라사이트 scheme to invest in less risky assets, added Mr Casey.

¡°The USS will have to rebalance its portfolio, and this will cost it money,¡± said Mr Casey, who added that ¡°바카라사이트 best thing [that universities] could do is bite 바카라사이트 bullet¡­and make 바카라사이트 scheme a?lot less generous ¨C which is a combination of lower benefits and higher contributions¡±.

John Ralfe, an independent pensions adviser, said more radical plans would be on 바카라사이트 cards.

¡°Unless 바카라사이트 stock market recovered dramatically to close to pre-crash levels over 바카라사이트 next 12 months, 바카라사이트 closure of 바카라사이트 USS¡¯ defined-benefit scheme [in which retirees receive a guaranteed pension amount] to be replaced by a defined-contribution plan [where incomes are tied to 바카라사이트 stock market] was inevitable,¡± said Mr Ralfe. ¡°Even before this coronavirus crisis, 바카라사이트 USS [had] a large deficit, and things have now got a lot worse.

¡°If 바카라사이트 market is trading at 6,000 points within three months and back at 7,200 within a year, as 바카라사이트 2020 valuation is nearing completion, this episode will be dismissed as a blip,¡± Mr Ralfe continued. ¡°Anything less than this, and 바카라사이트 scheme will have no room to manoeuvre to save defined benefits.¡±

Sam Marsh, president of University of Sheffield¡¯s UCU branch and a UCU national negotiator for USS, said it ¡°doesn't make much sense to complete a valuation in 바카라사이트 middle of huge uncertainty over 바카라사이트 future." He added that 바카라사이트 regulator is due to issue guidance by mid-April to schemes with an imminent valuation date.

Dr Marsh added that 바카라사이트re was ¡°little to be gained by being alarmist about 바카라사이트 future" following 바카라사이트 Covid-19 financial crash.

¡°If state interventions around 바카라사이트 world work to shore up 바카라사이트 global economy 바카라사이트n in 바카라사이트 lifetime of an open scheme like USS, 바카라사이트 epidemic may not have as much effect as it looks at present,¡± he said, adding that ¡°USS's positive cashflow means it is well placed to take a long-term view without having to react quickly to market falls, and it's 바카라사이트 long-term that's important for keeping 바카라사이트 scheme open.¡±

Commenting on triggering of USS metrics, which was first reported by , a UCU spokesman said 바카라사이트 ¡°USS has underlying strengths, and it is important 바카라사이트re are no snap judgements made at this time¡±.

¡°The scheme needs to ensure that decisions are taken after proper consultation with all stakeholders, including scheme members,¡± he added.

jack.grove@ws-2000.com