Thread by @MikeOtsuka

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay Thanks, Tristan, for these comments. I'll reply later....

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay First, some comments on what exactly is supposed to be meant by the claim that employers took a 'contribution holiday'. Employer contributions for USS DB future accrual were 12% 1975-80, 14% 1980-2009, 16% 2009-2016, and have steadily risen since then. 1/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay In addition, between 1983 & 1997, employers paid an extra 4.55% to make good an underfunding of the former FSSU pension scheme that USS superseded in 1975, leading to an overall contribution of 18.55% from 83 to 97. 2/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay Having made good that underfunding by 1997, employers ceased to pay this extra 4.55% then. But they have never lowered the level of contributions for USS DB. 3/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay For this reason, it would be a misrepresentation of the fact to describe the lowering of contributions back down to 14% in 1997 as a contribution holiday. 4/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay Some, however, have claimed that the 14% contribution was insufficient to cover future USS DB accrual in the 2000s. But this claim encounters the following difficulties: 5/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay The '99, '02 & '05 valuations 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 manner that @ucu now recommends. 6/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu The Minimum Funding Requirement in force in regs from '99 to '05 was one that #USS easily exceeded: its was 139%, 144%, & 126% funded in '99, '02, & '05 on MFR basis. 7/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu The scheme was in deficit in '05 by its own valuation methodology, which conservatively discounted liabilities at the rate of gilts+0%. But @ucu has constantly rejected such a gilts discount rate as too conservative & inappropriate in other regards. 8/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu On the best estimate minus approach to the setting of the discount rate that UCU advocates, and which conformed to the regulations in force at the time, the scheme was in surplus throughout the '99-05' period of 14% employer contributions. 9/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu As of the 2008 valuation, 1st under Pensions Act 2004 regulations that still apply, #USS appears in fine shape. Contributions up to 16%, but technical provisions funding level is 103% (£0.7 bn surplus) for a scheme that's 1/80th DB final salary on all salaries. 10/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu Moreover, the scheme is even *more* well funded -- 104% -- on an FRS accounting basis, where the discount rate is AA corporate bonds. This is the measure by which the scheme was in £17.5 bn deficit in 2017. 11/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu So by all accounts the scheme is in a good funding position as of 2008. Roger Gray took over as Chief Investment Officer in 2009. Had he managed the assets as SAUL managed theirs during the past decade, USS would still be in good financial shape. 12/

@TMSnowsill @misterpaws @etymologic @USSbriefs @UniversitiesUK @ActuaryByDay @ucu Sadly, #USS managed their assets much less well than SAUL did, in spite of the fact that they were receiving higher incoming contributions than SAUL's throughout. See👇. 13/13
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