Thread by @MikeOtsuka

In his 18 Oct letter to @ucu GS @DrJoGrady, @AlistairJarvis repeats this false £860 claim.👇 He writes: "a university staff member earning £40,000 per annum would be paying an additional £860 in pension contributions next year for the same benefits". 1/

https://twitter.com/sussexucu/status/1450413816362196993

The actual annual increase is +£550, not +£860. When we break this down by month, paying an extra £40 per month from April to Oct 2022 would make it possible for this member to retain current pension benefits rather than take the hit of the UUK cuts.👇2/

https://twitter.com/sussexucu/status/1450413818086141955

The extra £40 per month = a rise from £327 to £367 paid each month. That's a 12% increase to avoid UUK's reduction in their future accrual from 1/75 to 1/85 during that period, PLUS UUK's reduction in the upper limit of inflation protection from 10% to 2.5%. 3/

UUK's cut in accrual from 1/75 to 1/85 ALREADY reduces the value of this member's pension by 12%. Moreover, whenever CPI inflation rises above 2.5% (Sept-to-Sept) of any year during the rest of this member's life, the value of the pension is eroded much further. 4/

.@ucu's actuary @FirstActuarial has estimated that such a reduction in inflation protection would erode the value of one's pension by about half a percent per year on average, for the rest of one's life. 5/

The downward sloping orange line vividly illustrates the extent of the erosion by inflation of a 40 year old member's pension accrual under the UUK proposal.👇 /6

Even before erosion by inflation, this member's pension entitlement is already 12% lower than under the current arrangement (blue line), when they pay their contributions at age 40👇. That's the immediate effect of UUK's cut in accrual from 1/75 to 1/85. 7/

By age of 66👇, inflation in excess of the 2.5% CPI cap will have eroded things to such an extent that the pension this member can expect to draw in their first year of retirement will be 22% lower than under the (blue) current arrangement.👇 8/

The pension this member can expect to draw in their 86th year will be 30% lower than under the current arrangement, as a result of the @USSEmployers cut to their pension.👇(It will be a third lower by age 95.) 9/

This extra 12% in pensions contributions from April to Oct 2022 is money well spent to prevent cuts in one's pension from 22% to 30% during the first 20 years of one's retirement & greater cuts in successive years if one lives longer. 10/10

🚨🚨🚨While we wait for it to go back online, @sussexucu pension officer Jackie Grant & I have been analysing the assumptions of the official @USSpensions consultation modeller. We've found that it generate the same 22% cut at age 66 & 30% cut at age 86 as @ucu's modeller!👇1/

The graph👆also shows this: If @USSEmployers agree to @ucu's demand to revoke their cuts, a 40 yr old earning £40k would end up paying £240 more from April to Oct 2022 (£40 per month) in order to avoid a £1,500 loss (in today's pounds) in pension income from ages 66 to 86. 2/

As the rate of return on this £240 is a fantastic CPI+5.5% per annum👇, it would clearly make sense to pay £40 more a month to avoid the employer cuts. 3/
calculator.net/roi-calculator…

The above modelling assumes that CPI inflation will be 2.5% per annum. But... 4/

"Its latest forecast says inflation ... is set to jump from 3.1% to an average of 4% in 2022. However, the Office for Budget Responsibility says figures released since its report was compiled suggest that inflation could hit almost 5%." 5/
bbc.co.uk/news/business-…

If, moreover, as has occurred in the not too distant past👇, we experience sustained periods of inflation that runs (at least) 5% per annum on average.... 6/

The assumptions of the official @USSpensions consultation modeller imply👇that our 40 year old will experience a £3,800 loss in pension income from ages 66 to 86 if the @USSEmployers cuts are not revoked. 7/

An extra £240 in pension income to avoid a £3,800 loss in today's pounds amounts to a rate of return on one's contributions of CPI+8% per annum! 8/
calculator.net/roi-calculator…

.@USSEmployers, however, are so fanatically determined to avoid a modest 2.3% rise in their own contributions in April that they are prepared to expose all scheme members to the above huge risks of erosion of their pensions by inflation. 9/

Note, finally, that these are the risks implied by a @USSpensions modeller whose "assumptions have been approved by UUK for the purpose of the USS Trustee facilitating the provision of a benefit modeller to support the employer consultation". 10/
ussconsultation2021.co.uk/members/impact

Link👇to the spreadsheet which reveal how Jackie & I have generated the above graphs from the consultation assumptions approved by @USSEmployers. Special thanks to Jackie for designing the graphs & improving my spreadsheet coding. 11/11
sussex.app.box.com/s/jf2vwh6fl4cu…

We now have graphic visualisation of how misleading @USSEmployers's "headline reduction of about 12%" claim is.👇1/

https://twitter.com/MikeOtsuka/status/1398231668633260034

@USSEmployers The 12% @USSEmployers "headline" captures only the smallest initial gap between blue & orange lines as indicated by the red circle at far left. 👇2/

It fails to account for decades of erosion of the value of this member's pension by inflation as this gap grows larger over time, to a 22% reduction in the first year this member draws a pension at retirement age 66 & a 30% reduction by age 86.👇3/

These reductions in the value of this member's pension are based on the modeller's default assumed rate of CPI inflation of 2.5%. But market expectations of inflation in 10 years' time are now running at about 4%.👇4/

If one slides the modeller's inflation assumption up to a realistic 3.5% CPI per annum, the reductions in the value of this member's pension at ages 66 & 86 grow to 40% & 55% respectively. 5/

Slide the modeller up to 4% CPI and the reductions grow to 47% & 64% at ages 66 & 86 respectively.👇6/

And here's what happens when one slides the official @USSpensions consultation modeller's CPI inflation assumption up to the maximum 5%.👇😱7/7