Thread by @MikeOtsuka

Thread on whether @UniofOxford's rejection (see PVC's announcement👇) of Aon/UUK's contingent contribution (CC) proposal for #USS is a cock-up or a conspiracy. It's one or the other. 1/
newsletter.admin.ox.ac.uk/q/1m7IQGSos7G7…

First the case for COCK-UP: In their linked response👇(click 13 March update), @UniofOxford reject UUK's proposed lower bookend + CCs & express a preference for the following to that: #USS's upper bookend if DRCs are negotiated downward as UUK propose. 2/
ox.ac.uk/staff/working-…

This preferred downward-negotiated upper bookend = a certainty of 32.2% contributions to preserve DB status quo (minus 1% DC match) = +4% employer, +2.2% member contributions if split 65:35. 3/

By contrast, UUK's proposed lower bookend + CCs, which Oxford rejected, involves an initial contribution rate of 29.2% to preserve DB status quo (minus 1% DC match), with the possibility of triggered higher CCs. 4/

BUT the maximum triggered higher CCs would be the upper bookend of 32.2% AND there would be only a c. 2% chance of contributions rising to that level. (There would, however, be a 30% chance of contributions rising to at least 30.2%.) 5/

Nobody in their right mind would reject such a lower bookend + CCs in favour of the certainty of the upper bookend. That's akin to rejecting a variable rate mortgage starting at, say, 3% but capped at 6% in favour of a 6% fixed rate mortgage. Makes no sense. 6/

So why did @UniofOxford declare a preference for UUK's proposed upper bookend over UUK's proposed lower bookend + CCs? 7/

One explanation is that they weren't in command of the details of Aon's proposal for UUK & didn't realise that a preference for their proposed upper bookend over lower bookend+CCs makes no sense -- at least if one thinks DB could be prudently funded via the lower bookend+CCs. 8/

Moreover, @UniofOxford must think (status quo minus match) DB could be prudently funded via lower bookend+CCs, since they endorse 'the proposals put forward by the JEP', which call for the funding of such DB at 29.2% WITHOUT CCs. 9/

Here's an alternative to the explanation that they cocked up because they weren't in command of the details: @UniofOxford is reverting to its former position of calling for less risk even if this involves higher contributions. 10/

Moreover, @UniofOxford realises full well that, if CCs are rejected, then the scheme will be saddled with an upper bookend contribution rate of AT LEAST 32.2%. In other words, they are well aware of the following, as spelled out in UUK's latest consultation document👇. 11/

They also realise that, even though they may themselves be willing & able to increase employer contributions by at least 4% to sustain upper bookend DB of at least 32.2%, other employers will be unable or unwilling. 12/

So, in spite of their lip service to JEP, they're back to their old stance of support for proposals that render DB unaffordable & place pressure on employers to replace DB with DC. In other word, a reversion to form👇. 13/
medium.com/@mikeotsuka/ox…

I hope it's now clear why I was perplexed by, and did not join, all the hosannas 👇in response to this tweet. 14/

https://twitter.com/USSbriefs/status/1106160261759668225

Here👇is a list of the members of the working group that prepared @UniofOxford's response. Of them, @jayajohnjohn (of @OxfordUCU) & @dannydorling are on Twitter. I hope they might be able to shed light on their University's puzzling stance. 15/15

👆@ucu @mattwucu @AlistairJarvis @JoanneSegars @SallyBridgeland @BrinleyDavies @Sam_Marsh101 @Flibitygibity @carlomorelliUCU @HershMarion @Dennis_Leech @DaveGuppy @UofGVC @adamtickell @RedActuary @Derek_Benstead @kevinwesbroom @GuyCoughlan @USSbriefs @JosephineCumbo @Wonkhe

Link to subthread exchange between @Sam_Marsh101 and me👇.

https://twitter.com/Sam_Marsh101/status/1107207406344376320

I forgot to add this link👇to tweet 15/15.
ox.ac.uk/staff/working-…

PS: Oxford's blue highlighted claim👇 is incorrect. The 2014 valuation assumes immediate onset of de-risking rather than a 10 year delay.

PPS: In their 9 February document on contingent contributions, #USS characterised lower bookend rebate over upper bookend + contingent contributions as follows: 1/

“Effectively the contingent contributions offset some or all of the rebate, but only in adverse scenarios. This arrangement leads to a significantly lower expected cost over the long term, but at the same time provides protection to scheme funding when it is needed.” (p. 9) 2/

So, on USS’s own stated understanding of CCs, employers have compelling reason of lower expected cost to prefer them to the higher bookend – unless they think the lower bookend proposal is insufficiently prudent. 3/

But Oxford can't think that, since they endorse, as their first preference, a 29.2% lower bookend with no contingent contributions, which is even less prudent than the Aon/UUK CC proposal. 4/

Hence the mystery of Oxford's stance. 5/5