USS – Con Keating



I do not envy the task of the new CEO of USS, though I must state that I have no insight who this might be. Over the past decade, the governance of USS has degenerated into a disgrace, characterised by some of the worst practices of rogue bureaucracies. It seems that there has been a policy that information should not be readily released, and that which is should not be in complete or comprehensible form, and certainly none without an accompanying narrative of spin. Valuations have been reduced to exercises in gerrymandering.

To offer just a few illustrations: members were asked to believe that the investment returns of the fund would be CPI minus 0.75% for the next 30 years, and that was a major contributor the decision to cut members’ benefits. More recently, we were asked to believe that the loss of £20 billion of assets was a success story. We might ask: what would the loss have been had USS not been geared through repo borrowing and derivatives? That loss is more than half the annual budget of the higher education sector.

I will leave to others the task of determining why and exactly how all this has come to pass.

The task, of course, will be reform of the institution, which would benefit both employers and  scheme members. Much of this will take time to implement. It is tempting to suggest that a full forensic (multi-year) audit of USS should be conducted, and some masterplan developed, but the costs of the inaction and delays associated with that should be unacceptable to all.

There is an action which would signal to all that a new regime is in charge and go far in restoring trust and goodwill between all stakeholders. That action would be full and immediate restoration of the cuts to member benefits recently implemented.

It is now clear that these can be reinstated in full and leave a substantial margin for the lowering of employer contribution rates at future triennial valuations. This is not some artefact of the recent LDI crisis – we have seen a steady improvement of the funding position of USS over the past two years – from a deficit of £14.4 billion to a surplus of £5.6 billion. An indicator perhaps of just how distorted the 2020 pandemic valuation really was.

There is process to be followed, including a consultation of members, but it is hard to believe that members would not wish to see full restoration of their benefits. It would be feasible to achieve this by April 1 2023.  For more detail of the cuts and process, see:

I will not rehearse here any of the arguments which might be made with respect to the relative merits of partial restoration, or of contribution cuts, or other variants to immediate full restoration including the timing. They rightly belong to the discussions within the consultation process.

A signal from the management and trustees of USS that they would like to see restoration as soon as practical would be a start in repairing the troubled industrial relations of the higher education sector, which have been too fraught for too long. It would a start in restoring member trust and confidence in USS, which has been ruined by increasingly controversial valuations, which are clearly starting to come to light as just that.





An alternative view.

Mike Otsuka’s alternative view is available here

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to USS – Con Keating

  1. Michael Otsuka says:

    Thanks, Con, for sharing your view and also linking to my contrary view. Here’s why I don’t think it feasible to fully restore future accrual by 1 April 2023. If you can see a way around the following difficulties, please let us know.

    There are 85 days between now and the 1st of April, 60 of which would be needed for a member consultation on what USS regards as a ‘listed change’ of a rise in the DB/DC salary threshold, which would be restored for future accrual on 1 April 2023, according to the proposal to which you link.

    Below I spell out how unrealistic this would be:

    For it not to be a sham, some time would be needed to analyse and produce a report on the consultation responses, for the Board and JNC to consider. Last time it took 2 weeks to produce the report, with JNC and Board meetings thereafter. Let’s optimistically pretend that this could all be compressed into the last 7 days of March. On this optimistic assumption, the consultation would need to be launched no later than Monday the 23rd of January.

    For such a launch to occur, the following things would first need to happen:

    The union decides, in accordance with their democratic procedures, that it makes sense to press for this. Branches pass resolutions within the next 5 days, Branch Delegate Meeting calls for this on the 10th of January, and HEC passes a resolution at their meeting on the 12th of January, at which point the union calls on employers to join them in calling for USS to launch a member consultation, to be conducted by all USS employers with more than 50 USS members, in 11 days’ time.

    USS would claim that, even if they decided, on the spot, to launch such a consultation then, this would not provide employers with enough notice. They have said in the past that they need to provide employers with several months’ notice of 60 day member consultations. But let’s pretend that USS doesn’t raise this objection.

    The consultation material would need to be drafted and the wording approved. Would there be a modeller? Let’s also pretend that this could be done within 11 days.

    Even if we assume away all of the above problems, we run up against the following wall:

    It is clear that USS would refuse to authorise costings for this on the basis of 2020 post-valuation experience, especially as they would need to do so even before the results of the deep dive on 31 December 2022 figures are in.

    It is for these reasons that I think adopting this proposal would be akin to throwing union members against a brick wall.

  2. Michael Otsuka says:

    I’ve just posted a new blog called “The absurd timetable of the Reverse USS! proposal: The 11-day question which supporters of the proposal cannot and will not answer”. Please let us know, Con, if you’ve got an answer to this question.

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