USS: review confirms improved finances but changes will have to wait

A rosier financial outlook for UK higher education’s main pensions scheme has been confirmed by an in-depth review but calls for interim improvements in members’ benefits have been rejected.

The Universities Superannuation Scheme has published the results of its “accelerated year-end review”, commissioned after monitoring reports indicated a substantial reduction in the size of its deficit.

It has confirmed a “much-improved deficit position” compared with the last valuation of the scheme in March 2020, with the difference between assets and provisions shrinking from £14.1 billion to £2.1 billion in two years.

Improvements were likely to continue for the remainder of the quarter, the report noted, “despite the value of the scheme’s assets falling from around £93bn at the end of November 2021 to around £78bn at the end of June 2022”.

The size of the deficit was one of the main reasons why deeply unpopular changes that cut thousands of pounds from employees’ guaranteed retirement benefits were introduced earlier this year.

Universities UK and the University and College Union had requested the scheme’s trustee look into the possibility of implementing improved benefits or reduced contributions in light of the improved financial position.

USS maintains that without the changes, the deficit would be higher but has said previously that improvements could be made if the improved financial position is confirmed in the 2023 valuation.

However its board rejected making changes before that date because this would be “extremely unusual” and “would require a very solid basis for decision-making, which the current level of volatility simply does not provide”. It pointed to a backdrop of “considerable market volatility”, which is making long-term decision-making difficult.

The report added that the scale of the changes that could currently be supported was “limited” and the time it would take to prepare them would deflect from preparations for the all-important valuation.

“If preparations begin early…it may be possible to conclude the valuation and implement changes more quickly than has been the case recently”, the report said.

UCU has called for the cuts to the pensions scheme to be “urgently revoked” in light of the “drastic improvement” in USS finances. Its members held 13 days of strike action in the past academic year over the changes and another ballot on continuing the walk-outs is expected to begin imminently.

tom.williams@timeshighereducation.com