University of Cambridge reps highlight 'serious concerns' over USS valuation

Representatives for the University of Cambridge have written to the Universities Superannuation Scheme (USS) to express “serious concerns” over the approach taken to the March 2020 valuation.

The letter, addressed to USS Group CEO, Bill Galvin, argued that the scheme had missed an opportunity to rebuild trust between the USS, University and College Union (UCU) and Universities UK (UUK), as well as between members and employers.

Furthermore, it warned that based on the proposals so far, there is a “real danger of a serious and damaging breakdown in trust”.

Although it acknowledged the “significant challenges” faced by the USS, particularly in terms of the “extreme market volatility” present at the valuation date, it argued that the process undertaken so far is not one that is going to produce and “acceptable and fair” outcome to members.

In particular, it highlighted concerns around covenant, stating that the starting assumption that the covenant is “tending to strong” is incorrect.

Instead, it argued that there needs to more account taken of the underlying strength, longevity and special nature of the sector, stating that a more "productive and logical” starting point would be that the covenant remains strong.

In addition to this, it warned that achieving a workable debt position, pari passu and a rule change would be "extremely challenging" within the timeframe available.

Considering this, it emphasised that whilst it hopes the issues associated with the covenant support measures can be addressed urgently, if not, a short-term solution must be found.

It concluded: “We urge the trustees and the executive, even at this late stage, to take a step back, review what has been done so far, and re-engage with employers and members in a more productive way.

“The alternative is an outcome that may well result in long-lasting damage to the UK higher education sector and to the future of the USS."

In response to the comments, a USS spokesperson stated: “The hard reality is that pension benefits promised regardless of what happens to the economy in future, such as those offered by USS, have become very expensive in a world of ultra-low interest rates and slower growth.

“But we are committed to striving for the best outcome possible for our members and their employers in these incredibly challenging conditions.

“We recognise that affordability is crucially important and that securing the future of the valuable pensions USS offers will require strenuous efforts from everyone involved.

“A more affordable outcome is within reach if employers can evidence their commitment to the scheme through support measures. This would significantly reduce the contributions we’ve illustrated to date.”

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