The dissenting voice has long been upheld in British Universities. Minority opinions are valued as an antidote to received wisdom which all too often degenerates into herd-like conformity. So I worry when I read the justification that the USS are giving for their current stance on risk.

“The trustee’s fundamental belief is that risk is multifaceted, and requires a wide perspective, and broad tools to manage it appropriately. This approach to the valuation has been carefully constructed, and robustly built based on independent advice from our scheme actuary and covenant adviser. It has been subject to independent review by a third party actuarial firm, and by TPR. None of these reviews has suggested there is scope to take the level of risk in the funding arrangements that is proposed by recent commentary”.

The “recent commentary” in question is from Dr Sam Marsh and it criticises the Trustees’ position for being overly focussed on today and insufficiently focussed on the longer term. Marsh’s position is characterised like this

In effect, Dr Marsh’s approach takes the JEP’s proposals to ‘smooth’ contributions over two valuation cycles, and extends that to 20 years. It is not surprising that when this is done, current contribution levels are (in aggregate) ultimately adequate.

Taking a long-term view on funding as a basis for today’s snapshot valuation may not be “multi-faceted”, but it has one serious ally to commend it, common sense.

The USS has to take a long-term view as it is designed to run for hundreds of years through all kinds of economic conditions. The current conditions give us the lowest gilt yields on record and in any common-sensical view of history, would be seen as anomalous.

Projecting current conditions inexorably into the future is taking “short-termism” to an extreme.

Sam Marsh and Jane Hutton

Sam Marsh is not a trustee of USS, Jane Hutton is – albeit a suspended trustee, (charged with a kind of treason). Her treason, to point out that the consequences of following the strategy proposed by the USS risk management team would be to push contributions up making the scheme unviable for some employers and leading to new calls to close the scheme to future accrual.

Since the information that Jane Hutton- one of Britain’s leading statisticians, has been denied her, she is unable to carry out her job as a trustees (as nominated by the members). Sam Marsh has picked up where Jane Hutton cannot follow

The two of them are not wreckers, they are simply trying to make it clear to the members of USS that there is an alternative to the USS view of the world (multi-facteted as it is) and that view is based on common sense.

Common sense says that people will continue to want to go to Universities and British Universities in particular.

Common sense says that University teachers want to be paid a wage in retirement from a defined benefit scheme rather than something else.

Common sense tells us that the current dispute is being won by the likes of Marsh and Hutton and from the member’s union who say there is scope for the USS to take a long term view, invest for growth and adopt a discount rate that reflects the strength of the British University system (as confirmed by various covenant assessments).

So I am very much on the side of Jane Hutton and Sam Marsh and not on the side of actuarial (and regulatory) conformity.

Trouble brewing

While the USS stonewalls, there is increasing questioning coming from other third parties – specifically from Frank Field who is questioning not just what is going on with Jane Hutton, but why the Pensions Regulator appears to have been dilatory in its dealings

The letter is part of a wider inquiry from the Work and Pensions Select Committee into just what the Pensions Regulator is up to.

The trouble with conformity

The trouble with conformity is that – unless challenged – it produces received wisdom which may not be wisdom at all. Received wisdom is that privately funded pensions should not provide guarantees and so USS should close to new members and cease future accrual for existing members.

The Pensions Regulator, charged with keeping DB schemes out of the PPF seems to be complicit in the USS’ current strategy – which will likely lead to closure of the scheme.

The USS has recently been rebuked by TPR for overstating the explicit support of tPR for its strategy and of putting words in the regulator’s mouth. Nonetheless, the question Field asks, suggests that the relationship between tPR and USS is at best “cosy”.

The trouble with conformity is that it breeds arrogance, arrogance that with their actuaries and their regulator on their side, USS is invulnerable and can do as it likes.

But the behaviour of Jane Hutton and the work of Sam Marsh are showing how very vulnerable USS can look – and with them, those parties who presume that the USS are too big – too advised and too well paid – to be wrong.