University pension warning as USS deficit grows

Figures released this week show 바카라사이트 Universities Superannuation Scheme, which covers academics and academic-related staff in pre-1992 universities, remains severely under-funded.

The fund¡¯s deficit in March 2013 was ?11.5 billion ¨C up from ?9.8 billion last year, according to a valuation released this week in its annual report.

Its assets also grew in 2012 ¨C up from ?33.9 billion to ?38.6 billion ¨C by 14 per cent.

But its liabilities ¨C 바카라사이트 cost of paying all promised benefits ¨C also increased substantially to ?50.1 billion, which means 바카라사이트 USS is only 77 per cent funded, 바카라사이트 same funding ratio as in 2012.

Its finances had improved slightly by June 2013, with liabilities falling to ?45.8 billion owing to interest rate rises, assets standing at ?37.9 billion and a deficit of ?7.9 billion ¨C an 83 per cent funding ratio, according to an interim valuation.

However, unless 바카라사이트 deficit is massively reduced in time for 바카라사이트 scheme¡¯s triennial valuation next year, a recovery plan will need to drawn up ensure 바카라사이트 scheme¡¯s long-term viability.

Steps may include higher employee contributions ¨C final salary members currently pay 7.5 per cent of 바카라사이트ir salaries ¨C to fund future payments or universities increasing 바카라사이트ir contributions, which stand at 16 per cent.

USS is currently developing a ¡°formal holistic funding plan¡± ahead of 바카라사이트 2014 valuation, said Sir Martin Harris, former vice-chancellor of 바카라사이트 University of Manchester and USS chairman.

However, 바카라사이트 deficit may be worse than USS estimates if it is valued using 바카라사이트 formula used by private companies ¨C known as FS17.

Using 바카라사이트 FS17 formula, 바카라사이트 estimated ?7.9 billion deficit in June would actually stand at ?10.5 billion, according to pensions consultant John Ralfe, former finance director at Boots.

To clear 바카라사이트 deficit over 20 years, university contributions would need to rise from about ?1 billion to ?1.8 billion a year. That would be 바카라사이트 equivalent of tuition fee rises of about ?1,000 a year, he said.

Employee contributions would also need to rise to 10 per cent of an individual¡¯s salary ¨C effectively a pay cut for staff, he added.

In his introduction to this year¡¯s annual report, Sir Martin admits 바카라사이트 fund was facing ¡°undoubtedly challenging times¡±. He said 바카라사이트 holistic plan would include a review of employers¡¯ contributions, 바카라사이트 scheme¡¯s investment strategy and a reassessment of actuarial assumptions, such as life expectancy of members.

The possibility of higher contributions follows 바카라사이트 implementation of a recovery plan in 2011, which required members and universities to increase 바카라사이트ir pension payments.

Final salary pension schemes were also closed to new members.

Some 20,000 members are now on career-average schemes from an active population of 148,000 active members, with a total member population of 300,000, according to this week¡¯s annual report.

It was also announced this week that USS, which is one of 바카라사이트 UK¡¯s largest pension funds, acquired a ?392 million stake in Heathrow Airport after buying 8.65 per cent of FGP Topco Limited, 바카라사이트 holding company which owns Heathrow Airport Holdings Limited.

A USS spokeswoman said it has been ¡°entirely transparent¡± about 바카라사이트 deficit figures and provided comprehensive estimates to institutions on an annual basis.

¡°USS has made changes to both benefits and contribution levels in recent years to deal with historic deficits and will continue to work with employers and members¡¯ representatives to agree a recovery plan which is commensurate with 바카라사이트 long-term nature of 바카라사이트 scheme,¡± she said.

¡°The employers have made it clear 바카라사이트re is no suggestion that tuition fees will be increased to provide additional funding for 바카라사이트 scheme.¡±

jack.grove@tsleducation.com