Thread by @MikeOtsuka

These remain my latest (slightly updated) thoughts on the UUK offer. I'm now on a Twitter contribution holiday, where I hope to remain until there are any new developments w/ the offer. Thanks for the many expressions of kindness from strangers recently!

medium.com/@mikeotsuka/q-…

While we await the launch of the e-ballot and the new information that accompanies it, I've been making some substantive revisions and additions to the above post, as I reflect on things more. Below I spell out these revisions and additions. 1/

First, I note that I haven't made any changes in the light of yesterday's announcement that the e-ballot will close on the 13th. This announcement is in tension with remarks attributed to Sally Hunt in my answer to Q6. I want to preserve this for the record. 2/

Second, I have not made any changes to my claim that the JEP would not be able to complete its work in time to influence the 2017 valuation. This claim is in tension with point 12e in Jeanette and Patricia Finlay's excellent blog post linked here. 3/
twitlonger.com/show/n_1sqg6m9

Since the credibility of my posts is in part based on the accuracy of my predictions on the basis of the information I interpreted at the time, I will preserve and indicate those claims I made that have been falsified by subsequent events. 4/

I have, however, made some further substantive revisions to my post that are not on the basis of new information about how things have turned out. I spell them out below. 5/

Regarding the Test 1 perversity of a significant rise in employer contributions forcing de-risking of the scheme that is self-defeating, insofar as the funding of a higher level of benefits is concerned, I now indicate that this applies to an increase in 'regular'... 6/

employer contributions. By that I mean something other than an explicitly temporary increase. I believe that an increase that is explicitly temporary, with provision for reduction back to the lower level within a short period of time, would not have the perverse effect of... 7/

triggering much if any Test 1 de-risking. Hence it might be possible to implement Rule 76.4 cost-sharing so long as there is a sunset clause. (These thoughts arise from twitter exchanges with @DrJoGrady .) 8/

The upshot is that it is not clear whether employers could resist a TEMPORARY 6.9% hike in employer contributions with arise from imposition of Rule 76.4 cost-sharing, on grounds that it would cause self-defeating de-risking. They would, however, resist on grounds... 9/

of unaffordability to many even if not all USS employers. I have revised my answers to Q1 and Q7 in the light of the above. 10/

Re Q2 on reversion to the September valuation: I now explain that there are two aspects to a reversion to September and indicate that I think there might be some scope for modest departures from the November valuation, involving a partial delay in de-risking based on... 11/

the "new material evidence" of somewhat increased employer risk appetite (e.g., Oxford, Bristol, Cambridge). I also indicate that there is probably some scope for a modest reduction in the higher November deficit recovery contributions. Those are, however, what... 12/

I consider the limits of any possible mitigation of the November valuation. (I believe that the ACAS proposal already involves a mitigation of the level of deficit recovery contributions spelled out in the November valuation. For that reason, there may be little scope for... 13/

any further reduction in DRC.) 14/

Re my answer to Q6, regarding ways in which it might be possible to improve on the ACAS-mediated proposal in cost-neutral fashion, I now add that the following suggestion: 15/

Softening the inflation cap by introducing revaluation above the 2.5% cap, up to a maximum of 5%, if investment returns are better than expected. This might involve ‘catch up’ provisions to avoid permanent cuts to pensions from years when inflation exceeds 2.5%. 16/

I have also made some minor revisions here and there to eliminate unclarity or ambiguity or iron out inconsistencies in what I say. 17/17

PS to '6/-10/': Unclear whether Rule 76.4 default increase in contributions counts as 'regular'. If yes, self-defeating Test 1 de-risking. If no, maybe not. Perhaps JNC would need to make positive decision to render temporary, in which case Rule 76.4 default can't be realised.