Recent musings (21 February 2020)

Well, here we are again, some two years after I last wrote anything. In the meantime I've been in self-imposed silence (I suppose I could say that I sent myself to Coventry) while serving on the Joint Expert Panel.

Currently we are in the middle of another strike, Joanne Segars is leading tripartite talks to try and reach some long-term agreement about USS with significant progress reported, but resolution of the strike seems a long way off.

For now I would simply point to the comment in the second report: "The Panel believes that a failure to take forward the recommendations in this report would mark a failure for members, employers and the sector." In my personal opinion, it would also mark a signal failure by the regulator, which appears to continue in its inability to recognise the fundamental differences between a cash-positive, open, defined benefit scheme like USS and a closed fund in run-off.

So, the calculations for the technical provisions that I support (based on investing for the long-term and a "best-estimate minus" investment return basis) show a much more hopeful situation based on the recent data.

I shall be speaking on related matters at the joint Newton Gateway/Royal Statistical Society meeting on Mathematics and Statistics for Effective Regulation on 28th April, 2020.

Some documents

2nd report of the Joint Expert Panel

1st report of the Joint Expert Panel

All is for the best...

Is this the five minute argument or the full half hour?

Letter to Rt Hon Frank Field.(chair of the parliamentary Work and Pensions Committee)

Letter to Prof. Janet Beer (chair of UUK)

Some useful valuation documents

Some light-hearted notes on USS and actuarial terminology

Recent developments (25 Jan 2018)

You will probably have heard that the Joint Negotiating Committee for USS has decided (on a casting vote by the independent chair) to recommend a proposal under which the Defined Benefit element of USS is "suspended for the next three years". I very much regret this and feel that DB schemes have been thoroughly betrayed by the Pensions Regulator; in part on the advice of some very opinionated and unwise actuaries and in part because, for the last 10 years, the Treasury has been raiding the nation's DB pension funds via Quantitative Easing thanks to artifically low gilt prices and the strong pressure to buy them.

It is perhaps understandable that our employers have become fed up with the constant pressure on funding that has resulted, particularly as actuaries seem to have become mildly unhinged about "derisking" and the low volatility of gilts at a time when low yields have actually made long-term gilts more volatile, as well as a lower-return investment, than the UK equity market.

The solution proposed for USS is not very appealing and penalises both

the young:-since they will not have the opportunity to build defined benefits and will instead have to accumulate a pension pot which will then be very costly to turn into a pension at retirement;

and the older members who (have admittedly accumulated pension by foregoing about 20% of effective remuneration for 20-30 years but) will not now enjoy further accumulation during the expensive years near retirement, when the value of contribtions is much-exceeded by the accruing pension.

I am personally also rather upset that Warwick UCU members have voted to strike. Not because I object in principle but because I think our senior management have been exemplary in their efforts to avoid this outcome and should not be blamed for it in any way.

It would surely send a much clearer message to UUK if staff at Warwick (and Loughborough) were the only USS members who did NOT go on strike..

You might like to consider amending the attached letter as you see fit and sending it to your VC and/or MP.

The associated summary of DC investigation is here.