Bill Galvin – on accountability at #USS

Bill Galvin

Bill Galvin

If Jo Cumbo hadn’t mentioned it I’d have missed it. Bill Galvin- erstwhile CEO of the Pensions Regulator and now boss of the University Superannuation Scheme wrote a thought piece on the USS blog – it’s here.

It’s a meditation on accountability.

It’s called  “What should our members think about USS”, which suggests that there’s a right and wrong answer. I’d have thought a more pertinent question would have been “what do our members think about USS?”. In footballing terms, the members are the dressing room and the Bill is the manager.

We all know that there are two sides to the debate and most readers of this blog knows who is on whose side. The management of USS and the Trustee Board are supposed to be about making sure pensions get paid and that means they have to appease both the employers – who sponsor and the members who also sponsor – but benefit from the fund.

Bill sums up his dilemma in very simple and human terms

it is quite clear that the cost of insuring the future is even more expensive than it was at the last valuation, and the risk associated with going against the general consensus on future returns is higher, and so potentially more catastrophic if proved wrong

Though he doesn’t say so explicitly, the “general consensus” almost certainly means a strategic shift to bonds from more volatile growth assets. No manager wants to be out of step with the consensus, unless it is clear that he is the “special one”. Bill does not strike me as wanting to be considered a “Mourinho”.

But nor does he want to be reviled on the terraces. It must be daunting going to work with social media buzzing in your ears. Back in the day, managers were not accountable as members had no voice. University lecturers (the bulk of the USS members) are both vocal and articulate. Their students have been vocal and so have the parents of those students, these are the ultimate sponsors of Universities.

It is normally considered a good thing for stakeholders to participate in  governance. But the debate over the future of the USS has alarmed its management.

It has been alarming, therefore, to see the confusion, concern and distrust that some of the commentary has generated amongst our members

There was a time, when decisions on pension schemes were left to employers and trustees and regulators. There is a hint of nostalgia for this time in Bill’s admission that

Whatever the contributions of others might have been in that outcome, we clearly failed to communicate simply enough, convincingly enough, or from a basis of sufficient trust, to make the key messages clear


What “should”  the members think?

In the phrase “key messages”, I suspect Bill implies “the truth”. USS failed to properly communicate the truth and allowed the commentary to get in the way.

It must be frustrating for USS, who have been candid throughout, to be cast as obscuring the truth. I haven’t read all their communications , but what I’ve read from USS has offered insights into the competing pressures on the scheme.

The frustration must be borne from powerlessness. Ultimately Mourinho is accountable both to the Shed (or the Stretford End) and the oligarchs and may end up pleasing neither.

But I think Bill Galvin misses the point in blaming himself for poor communication. USS has communicated well – factually and for the most part without bias. What he is facing are two completely different paradigms of thought. On the one hand there are people who see USS as impairing the ability of our Universities to function and on the other people who see it as essential to maintaining the support of their greatest asset the teachers. Both views can use the information coming from USS to support their positions- and both do.

It is not the fault of USS’ communications that “commentators” take positions.

Bill Galvin has something of the Gareth Southgate about him. Amid all the noise that is going on around him, he continues to run USS – and run it very well. He will, so long as he pursues this path, have done his job. It is not his job to manage industrial relations or indeed to control social media. His authority, comes from his focus on getting the scheme to work properly. Like Southgate, he can keep smiling whatever the members and employers do. The members “should” thank him for that.


What do the members think?

The University Lecturers think a lot, and they talk amongst themselves on and off social media. They are well organised and have thought leaders of their own – some have written on this blog.

Their views will be expressed not just through words but through actions. Having a son about to start his third year at college who lost a large part of his second year’s teaching, I hope that they will not strike again. But I respect their right to strike on a matter as important to them as how it is they get paid.


What do the sponsors think?

I suspect that those who run universities have been surprised by the depth of feeling among members about keeping their DB scheme open.

As Bill Galvin writes in his piece

Ultimately, our task has been to make assumptions about how the world will turn at a time of significant uncertainty. These conditions have seen the number of private defined benefit pension schemes in the UK that are still open to new members fall from circa 3,500 in 2006 to around 700 today.

Most employers have given up in the face of these challenges.

That UUK has not “given up” is because the members have not let them. UUK is learning from the conversation that is going on. They are reacting not to what members “should think” but what they “do think”.


“A time of significant uncertainty”

It is easy to get lost in the madness of Brexit and the 2008 market crash and consider the last ten years as a “time of significant uncertainty”.

But the fundamentals of Universities remain unchanged, they teach and research and provide the nation with an underpin of learning which is part of the nation’s fabric. There is no reason to think of the uncertainties as being of great importance in that context.

The certainty of reward provided by a Defined Benefit Scheme is in line with the greater certainties that Universities bring us. Ultimately, I think Bill Galvin gets this.

As he concludes

We do not believe that providing defined benefit pensions is impossible, but it must be done in a framework that allows adjustments to be made that ensures the scheme can avoid the worst future outcomes, and sometimes these can involve challenges for certain cohorts of members.

Having read Bill’s blog three times, I am heartened that he will continue to run an excellent scheme, whatever anyone else should or does think!

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions, USS and tagged , , , , , . Bookmark the permalink.

3 Responses to Bill Galvin – on accountability at #USS

  1. “….. quite clear that the cost of insuring the future is even more expensive than it was at the last valuation”.

    So Mr Galvin sees his role as being in the insurance business rather than investing to fund pension payments as they fall due, with appropriate (ie significant but not excessive) margins of prudence.

    His apparent clarity also contradicts with his other views about uncertainty.

    Liked by 1 person

  2. henry tapper says:

    I’d like to give Bill the benefit of the doubt and hope that he’s not thinking of packing the fund off for buy-out/buy-in. It’s unclear why the cost of insuring people against living too long has gone up. The mortality assumptions he’s now using help the funding position. I took this as a general moan that “things ain’t getting any easier” – but maybe you’re right – in which case – look forward to be a big fat reserving bill on your doorstep in the not too distant!

    Liked by 1 person

  3. “It must be frustrating for USS, who have been candid throughout, to be cast as obscuring the truth.”

    I think you’re being rather generous to USS here! Perhaps read the string of letters I exchanged with Bill Galvin in September last year (found on the petition site below). Consider also the fact that the UCU representatives on the Joint Negotiating Committee are struggling to get all the information from Bill and his team that we’re after, and are being asked to keep confidential all papers under discussion, many of which have no sensitive material in them.

    The USS executive could benefit A LOT from realising they would regain trust by opening up their calculations and decision-making procedures for public scrutiny.

    USS must show its workings (petition): https://you.38degrees.org.uk/petitions/uss-must-show-its-workings

    Like

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