Thread by @MikeOtsuka

🧵explaining what's so wrong with @USSEmployers VC Alistair Fitt's claim on @BBCr4today that "Modelling published by the @USSpensions trustee themselves shows that impact [of UUK's proposed pension cuts] is likely to be between 10% & 18% for the vast majority of members." 1/

As I've drawn to @USSEmployers's attention on more than one occasion👇, the 10-18% range is based on an outdated & otherwise indefensible assumption which understates the detrimental effect of the 2.5% cap on CPI revaluation. Please read🧵👇. 2/

https://twitter.com/MikeOtsuka/status/1459473692233240579

.@ucu noted that this assumption was so indefensible that persisting with it would expose the consultation to legal challenge. We maintained that our actuary @FirstActuarial's modelling of the inflation cap was far more accurate. 3/

Realising that they had no leg to stand on, @USSEmployers eventually relented & agreed at the 11th hour to update this assumption for the consultation modeller to one that is almost identical to @FirstActuarial's!👇 4/

https://twitter.com/MikeOtsuka/status/1456610528667832329

It was on account of @USSEmployers's stubbornness in attempting to defend their indefensible inflation assumption up to the 11th hour that the launch of the modeller was delayed for 8 days! 5/

Once one updates to the inflation assumption of the modeller which @USSEmployers finally approved at the 11th hour, the 10%-18% range of the negative impact of UUK's cuts becomes a 13%-23% range. But it gets worse.... 6/

The lower 13% end of the range is as low as it is only because this represents the cut to the OVERALL USS pension (past + future accrual) of a member who is already 51 years old & has been in the scheme for 18 full years. 7/

Of course, @USSEmployers's cuts affect only FUTURE accrual, not past accrual. Hence it looks less bad if one adds the UNCHANGED PAST accrual of a member of long standing to the cut in her future accrual. 8/

In fact, the cut to the FUTURE accrual of this 51 year old person's guaranteed DB pension is severe: 46% at retirement age of 66. Because UUK's cap on inflation revaluation wreaks havoc after as well as before retirement, this cut grows to 51% by age 86. 9/

Even when one converts this person's DC cash to drawdown 'income', & adds this to the DB pension, the cut to her overall FUTURE accrual is 26% at age 66 & grows to 28% by age 86. 10/

If one instead converts this person's DC cash into an annuity which replicates her guaranteed DB pension, & adds this to the DB pension, the cut to her overall FUTURE accrual is 31% at age 66 & grows to 34% by age 86. 11/

The 10% lower range that @USSEmployers constantly quotes is therefore multiply misleading. For now, I extend the benefit of the doubt & assume that it is because they are not in command of the details that spokespeople for @USSEmployers have repeated this figure. 12/

Now, however, that I've pointed out the multiple respects in which the 10%-18% figure is misleading & unsound, its repetition by @USSEmployers will constitute a deliberate attempt to misrepresent. @AlistairJarvis @RussellGroup 13/13

Let's now examine the 18% figure at the high end of the 10-18% range that @USSEmployers loves to repeat. As noted👆, once one replaces the indefensible inflation assumption that UUK was forced to replace with something defensible, the cut grows to 23%. But it gets worse... 1/

@USSEmployers That 23% figure assumes that the person converts his DC pot to income drawdown, with all the longevity & investment risk that entails. If one converts one's DC pot into an annuity that provides a pension comparable to the DB pension UUK is slashing, the cut grows to 27%. 2/

@USSEmployers That 27% cut is at point of retirement. Given the further hits this person's DB pension will take during retirement whenever inflation exceeds 2.5%, the cut is expected to grow to 31% by age 86. And it gets worse... 3/

Here @USSEmployers is still playing their game of combining pension income from past accrual, which is unaffected, with pension income from future accrual, which they propose to severely cut. 4/

This person is 43 years old. He has 23 years of reduced future accrual to contend with between now and retirement, under @USSEmployers's proposed cuts. 5/

Future accrual of his guaranteed DB pension for those 23 years until retirement is cut by 46% by the time he retires. With 20 further years of erosion when CPI rises above 2.5%, the cut in his DB pension grows to 51% by age 86. 6/

He ends up with a larger DC pension pot at retirement, given that UUK is reducing the DB/DC salary threshold from £60k to £40k. This partially mitigates the cut to his future pension accrual. 7/

But only partially. If he converts his pension pot into an annuity, the cut in the overall value of his future pension accrual remains 34% during his first year of retirement. It grows to 39% by age 86. 8/

Therefore the 18% end of the 10-18% range talking point that @USSEmployers got @oxford_brookes VC Alistair Fitt to repeat on @BBCRadio4 is also a gross understatement of the magnitude of UUK's cuts. 9/

All of my👆figures are derived from the official consultation modeller whose assumptions @USSEmployers has approved. Spreadsheet to show my work👇. 10/10
docs.google.com/spreadsheets/d…

👀@USSEmployers don't know what they're tweeting about👇. As I note in tweets👆, the 10%-18% figure is based on an inflation assumptions that is so flawed that UUK had to abandon it in favour of one nearly identical to @ucu's actuary @FirstActuarial's. 1/

https://twitter.com/USSEmployers/status/1466102132940103691

👇🤦‍♂️. I plugged the details of the three personas that were used to generate the 10-18% range into the VERY SAME MODELLER that @USS is calling on us to use. That's how I showed that the impact is much greater than 10-18%. 2/

https://twitter.com/USSEmployers/status/1466102134437552128

@uss Urm, I actually don't promote @ucu's 35% figure anywhere in the above thread. 3/

https://twitter.com/USSEmployers/status/1466102131396681733

But I note in this DIFFERENT thread👇that, when one plugs the details of the example that generates @UCU's 35% figure into the official consultation modeller whose assumptions @USSEmployers's have approved, the cut is even greater than 35%! 4/

https://twitter.com/MikeOtsuka/status/1462747439518072833

Indeed👇! 5/5

https://twitter.com/Sam_Marsh101/status/1466116499941249024