A blog in which I argue for the importance of acceptance in full by union and employer of the proposals of the Joint Expert Panel on #USS. Further remarks below on the graphed 65%-35% employer member split of contribution increases. 1/
Some have questioned my claim that the 65%-35% employer-member split of the 3.2% contribution increase graphed above in the righthand column of Figure 10 of the report is among the JEP's proposals. 1/
Whether or not JEP ‘proposes’ this, they are offering a clear steer in the direction of a 65%-35% split. The JEP chair also says the following in the introduction: 2/
There's a bonanza of new FOI responses that give us a much better sense of the range of university responses to #UUK#USS consultations from Oct 2016 and Feb/March 2017. Picking through them it's fascinating to see which universities challenged the direction of travel 1/
e.g. Aberdeen: "Aon ... & UCU have indicated that it may be advantageous to consider other models. We are interested in the Trustees views as to whether there are alternative models that could result in a more considered outcome" whatdotheyknow.com/request/508696… cc @aberdeen_ucu 2/
e.g. LSE: "We note that the latest benefit changes were implemented less than 12 months ago. The School’s view is that it is too soon for further changes to be made." whatdotheyknow.com/request/509128… 3/
1. There's a judicious use of rhetoric – particularly around 'confidence', '(mis)understanding' & 'communication'. This cleaves closely to that used by #UUK & Bill Galvin – whether that is deliberately so as to increase likelihood of acceptance by those parties, you can decide 3/
So, yesterday the Joint Expert Panel offered its first report on the #USS pension valuation. Here is an attempts at a ‘plain English’ account of what it says.
The history of the dispute up to the point at which the JEP was established is explained in a lengthy but plain English account here: leedsucu.org.uk/a-plain-englis…
The JEP report itself is written in very understandable way, and it is full with helpful appendices and clarifications. Nonetheless, my summary here is intended for those who feel overwhelmed by the detail of the history of the dispute, the various technical terms and so on
Okay. I'm live-tweeting again. In a very welcome recommendation, JEP recommends that FOR THIS 2017 valuation, USS revert to the Sept proposed 10 year delay in de-risking and increase Test 1 permitted outperformance of low risk self-sufficiency portfolio from £10 bn to £13 bn. 1/
The increase in permitted outperformance (aka 'reliance on the covenant' or 'gap to self-sufficiency') would simply involve an assumption of growth in the payroll by CPI rather than prudent downward adjustment below CPI. 2/
Actually, I see that the move from £10 bn to £13 bn was a joint suggestion of @Aon & @FirstActuarial (i.e., @UniversitiesUK & @ucu actuaries, but who provided *independent* advice to JEP). JEP recommends increase in gap but doesn't specify a figure. 3/
I'm v happy to see the disruptive role of Test 1 being acknowledged & criticised. I'm also v happy to see suggestion that employers attitude to risk & the affect this had on the covenant be re-evaluated. Likewise it's good to see assertion that updated data & measures be used.
Consultation on #USS contribution increases opens today. Their website is now live (link). Some differences, on which I comment below, between what's on the website & what's in the hard copy consultation document that we've received in the post. 1/ ussconsultation2018.co.uk/members
🚨🚨🚨Link to @Sam_Marsh101's well-documented, sound & explosive addendum to his JEP submission, which reveals a serious failure on the part of #USS to apply Test 1 properly, in a manner that makes sense of its underlying rationale: 1/ medium.com/ussbriefs/adde…
Recall my earlier "FALSE PROSPECTUS" tweet on Sam's findings: 2/
This thread links to various #USS documents that spell out Test 1's rationale as follows: the gap between the value of the *ASSETS HELD BY THE SCHEME* & the assets required to purchase a low-risk self-sufficiency portfolio must not become too great. 3/
But to determine whether Test 1 is currently satisfied, #USS needs to project assets that would be in the fund in 20 years' time, assuming 67% probable investment returns of prudent discount rate are realised. 2/
For confirmation of above, see this passage from p. 40 of Sept 2017 consultation document: 3/
After writing my thread, I sent a plea asking USS to reconsider allowing me to release the data, which is nothing more than four columns of numbers relating to projected cashflows for the next 100 years. I even asked for a lesser permission of sharing with the JEP alone. 2/
I'd had no reply by Thursday, so sent another email, this time saying I'd take silence to mean it was OK for me to send the spreadsheet on to the JEP. After all, JEP members have been made to sign NDAs, and they probably already have their hands on similar data. 3/
Here I distill my threads of the past few days into a single message: the @FirstActuarial & @ucu approach to the investment and valuation of #USS is not some radical new theory. Rather, it's in line with the way #USS used to run things, before Bill Galvin took over as CEO. 1/
It's the way #USS ran things from its foundation in 1975 until Galvin took over in 2013. For all of those years, we had DB on all salaries with 1/80th accrual. There was a modest reform in 2011, with the introduction of career average for new members. 2/
But it remained DB on all salaries, at 1/80th accrual. Moreover, it was not merely because of different regulatory regimes that it was possible to provide DB on all salaries. The 2008 and 2011 valuations were conducted under the current regulations. 3/
Want to understand #USS pension valuations? Watch this video! SUCU president & USS negotiator @Sam_Marsh101 explains 3 variants of a valuation model. Notice that if de-risking is cancelled, the picture is much rosier than UUK would have us believe!
As this graph shows, #USS has already engaged in extensive 'de-risking' of its portfolio from equity into bonds during the past 10 years. Calls from @FirstActuarial and @ucu for a cancellation of plans for further de-risking should be assessed in this context. 1/
2007 is an instructive benchmark, since it marks the point of transition from the regulatory regime that was the upshot the 1995 Pensions Act to that which was the upshot of the 2004 Pensions Act. 2/
As this account show, the 95 PA regs were highly friendly to investment in equities. MFR = minimum funding requirement which USS greatly exceeded. Non-pensioner liabilities matched by equities. 'Equity easement' of pensioner liabilities for large schemes such as USS. 3/
Remember how a few weeks back #USS sent me some data relevant to the valuation and, in particular, Test 1? Well, I've been playing around with it and found out some VERY interesting (if technical) things. Read on. 1/
Firstly, the new data has pulled the valuation spreadsheet I've cobbled together nicely into line with numbers #USS have published in various documents. In other words, I have got a rough and ready model of the valuation which works pretty well. 2/
USS say 5.1bn deficit, my spreadsheet says 5.0bn
USS say 7.5bn deficit, my spreadsheet agrees
Cancel the de-risking (allowing for prudence)?
My spreadsheet says 0.5bn deficit, same figure I was told last year by @alanhigham100 of USS. 3/
The '99, '02 & '05 valuations that Deepa analysis were *before* the days of tPR and Pensions Act 2004. They were all governed by Pensions Act 1995, which provided much more scope for #USS to fund & manage the ongoing scheme in the sensible manner @FirstActuarial recommends. 1/
In this long thread, I draw attention to the many ways in which #USS ran their scheme back then in the sensible manner that @FirstActuarial endorses: 2/
A reason why @Sam_Marsh101 may be right re significance of @deepa_driver's @USSbriefs: a few months ago, #USS removed valuations pre-2011 from their website. They were asked to restore them, but they didn't. Why did they remove them and not restore them?
There was something that struck me as odd about @UniversitiesUK's April denial that they ever took a 'contribution holiday': their definition of 'contribution holiday' as involving less than what the *trustee* requires. 1/