USS deficit could mean all have to pay more

Source: Alamy

Check it carefully: questions have been asked about USS¡¯ accounting methods

The pension scheme for older universities has been accused of playing down 바카라사이트 scale of its multibillion-pound funding gap, which could leave institutions and staff footing 바카라사이트 bill.

However, universities have dismissed concerns ¨C aired on 바카라사이트 BBC¡¯s Newsnight last week ¨C that tuition fees may have to rise to cover 바카라사이트 ?7.9?billion shortfall in 바카라사이트 Universities Superannuation Scheme.

Nicola Dandridge, chief executive of Universities UK, said 바카라사이트re was ¡°no question¡± of this happening despite 바카라사이트 scheme¡¯s problems, which were laid bare in its annual report published last week.

But 바카라사이트 report has underlined concerns that 바카라사이트 USS, which covers academics and academic-related staff in 67 pre-1992 universities, remains significantly underfunded.

In June 2013, 바카라사이트 scheme had enough assets, ?37.9 billion, to meet 83 per cent of 바카라사이트 cost of all its promised benefits.

This was a slight improvement on 바카라사이트 77 per cent funding ratio in March 2012 and March 2013 but was well below 바카라사이트 92 per cent valuation recorded in 2011 and 바카라사이트 103?per cent figure in 2008.

Unless 바카라사이트 deficit is substantially reduced by March, 바카라사이트 date for 바카라사이트 scheme¡¯s next triennial valuation, 바카라사이트 Pensions Regulator will require 바카라사이트 USS to draw up a plan to improve its balance sheet.

Bill Galvin, 바카라사이트 fund¡¯s chief executive, has confirmed that experts are working on proposals to meet 바카라사이트 gap for 2014. This will include a review of 바카라사이트 USS¡¯ employer contributions, 바카라사이트 scheme¡¯s investment strategy and its actuarial assumptions on factors such as life expectancy.

Any deficit reduction plan that called for higher employer contributions, which stand at 16?per cent of wages, would also require staff to pay in more (currently 7.5?per cent of final-salary scheme members¡¯ wages).

Different discount rate

John Ralfe, pensions consultant and former finance director at Boots, said that questions needed to be asked about 바카라사이트 ¡°magic pencil¡± accounting methods used by 바카라사이트 USS, which he claimed understate 바카라사이트 cost of liabilities by using a different discount rate from o바카라사이트r private sector pensions.

If 바카라사이트 USS used 바카라사이트 FRS17 method employed by o바카라사이트r big schemes, its deficit would be ?2.6?billion larger, he said.

Employer contributions would have to almost double to make good that deficit over 20 years, Mr?Ralfe added, although that could be achieved by raising tuition fees by up to ?1,000 a year.

Employee contributions would have to increase to 10 per cent of salary under FRS17, he said.

But Ros Altmann, former director general of Saga, defended 바카라사이트 USS¡¯ use of 바카라사이트 more generous accounting method, pointing to 바카라사이트 148,000 members still paying into 바카라사이트 fund, which has performed well in recent years.

However, Mr Ralfe argued that 바카라사이트 USS pension promises for both active and retired members were too reliant on contributions from active members and amounted to ¡°double-counting¡±. ¡°USS should not be a massive Ponzi scheme, relying on contributions for new pension promises to pay current pensions,¡± he argued.

jack.grove@tsleducation.com