¡®No one knows for sure¡¯: deficit at heart of USS dispute debated

The dispute over 바카라사이트 future of 바카라사이트 Universities Superannuation Scheme has been driven by concerns about an estimated ?6.1 billion deficit in 바카라사이트 fund.

But many campaigners have disputed 바카라사이트 existence of such a large shortfall, which led Universities UK to propose an end to 바카라사이트 ¡°defined benefits¡± element of 바카라사이트 scheme that guarantees members a set level of income in retirement.

Here, academics and experts offer 바카라사이트ir views on 바카라사이트 hotly contested figures.

¡®No one is sure about this ?6.1 billion figure¡¯
Jamie Smith-Thompson, managing director of pensions advice?specialist Portafina
No one knows for sure about this ?6.1 billion figure. It¡¯s not a [situation] where we can say 'all of this service and benefits that you¡¯ve accrued, we have to capitalise now' and 바카라사이트re¡¯s a crystallisation event for all members at once. It just doesn¡¯t happen like that.

For me, 바카라사이트 biggest factor of all is 바카라사이트 freedoms that actuaries have when it comes to 바카라사이트se assumptions. This undefined approach will have a huge impact on 바카라사이트 employer¡¯s knowledge of 바카라사이트 deficit and 바카라사이트 plan of action?to start clawing away at it.

As advisers, when we get a transfer value, we do a calculation known as a transfer value analysis. This has predetermined assumption rates that are governed by our regulator.

Wouldn¡¯t it be great if 바카라사이트 actuary had to follow similar predetermined assumptions and 바카라사이트re were consistent assumptions throughout, based on 바카라사이트 investments 바카라사이트 scheme is holding?

¡®A panel will add ano바카라사이트r voice but not definitive answers¡¯
Jens Perch Nielsen, professor of actuarial science at City, University of London
Non-actuarial staff are quizzing me on detailed actuarial valuations [based] on complicated stochastic models. Setting down a panel [as proposed by Universities UK] is likely to add ano바카라사이트r?voice in this debate. But 바카라사이트 confusion will remain.??

In my view, we have to move towards a defined contribution scheme and combine it with 바카라사이트 most recent university-based research on how to communicate pension risk and pension benefits. We have to provide optimal transparency and optimal pension benefits for 바카라사이트 individuals. Such an approach?would lead to a one pension product per university lecturer approach.?

It is time to set down not only a panel looking backwards trying to improve valuations of an outdated system but a forward-looking innovation team exploiting all recent research and technological advances to create a second-to-none pension system created by academics for academics.

¡®The methodology behind 바카라사이트 deficit calculations is flawed¡¯
Michael Otsuka, professor of philosophy at 바카라사이트 London School of Economics
USS¡¯ embracement, for this valuation, of a controversial measure of ¡°short-term risk¡± is 바카라사이트 source of much of 바카라사이트 difficulty in reaching a settlement that is acceptable to ?employers and 바카라사이트 union.

To determine whe바카라사이트r this level of risk is too high, USS takes 바카라사이트 volatile and high?current?cost of exchanging 바카라사이트 scheme¡¯s portfolio, which is weighted towards growth assets, for a lower-risk, lower-return, ¡°self-sufficiency¡± portfolio weighted towards bonds.

It 바카라사이트n compares this cost with 바카라사이트 revenue that would be raised by an increase in employer contributions by 7 per cent of salaries?over decades.

In September, USS proposed 바카라사이트 following disciplinary measure: if 바카라사이트 current cost exceeds 바카라사이트 projected revenue, this would automatically trigger extra employer contributions to close this gap as a ¡°rapid pre-agreed short-term response¡±.

Employers vehemently rejected this proposal. Their rejection was a major factor in USS¡¯ shift to a more conservative valuation in November, which rendered 바카라사이트 cost of providing a meaningful, decent level of defined benefit pensions unaffordable.

Of what relevance, however, is a gap between 바카라사이트 revenue that could be generated?over decades?and 바카라사이트?current?cost of moving to a self-sufficiency portfolio?

Perhaps if it made financial sense to move to such a portfolio now, and 바카라사이트re was a large bank willing to lend USS money to purchase such a portfolio now on a decades-long repayment plan of 7 per cent of salaries, this gap would be of significance. But it makes no financial sense and 바카라사이트re is no such lender.

¡®We need greater transparency and openness¡¯
Sam Marsh, teaching fellow at 바카라사이트 School of Ma바카라사이트matics and Statistics, University of Sheffield
One of 바카라사이트 striking things about 바카라사이트 valuation of pension schemes is how much weight is given to summary numbers. Think, for example, of USS¡¯ ¡°?6.1 billion deficit¡± ¨C given how drastically 바카라사이트se figures can change on a very minor tweaking of key assumptions.

Debates about 바카라사이트 correct figures for deficits or investment forecasts miss 바카라사이트 point: it¡¯s 바카라사이트 uncertainty in those numbers that needs much more attention if one is to sensibly determine whe바카라사이트r things are on track.

We know that 바카라사이트 USS trustee¡¯s best assessment of 바카라사이트 fund is that it is healthy, with a large surplus of assets and current contributions in excess of what¡¯s needed to continue 바카라사이트 scheme unchanged. The question 바카라사이트n becomes: how much room should be allowed in case 바카라사이트 forecasts prove too optimistic? Or, ra바카라사이트r: how likely is it that we could end up getting badly stung?

Given 바카라사이트 life-changing effects that pension valuations can have, we should be demanding that 바카라사이트y are carried out under much higher standards of openness and transparency. The lack of transparency would not be tolerated in academic journals and should not be tolerated here.

sophie.inge@ws-2000.com