USS pension dispute is over.

I am very pleased to hear that the 5 year long pensions dispute between the UCU Union and UUK over the funding and benefits arising from the USS pension scheme is over.

It’s over because all sides have agreed that the supposedly parlous state of the pension scheme’s finances was overstated and the cuts in member benefits – introduced recently have been reversed and £900m dedicated to restoring what has been taken in the interim.

This graph shows how average funding levels of pensions has progressed , if measured on an ongoing “best estimate” basis, rather than on a marked to market basis of valuations.

This chart speaks to all the 5200 DB schemes in the PPF index – USS is only one but it is the largest scheme protected by the PPF

Assets over the period covered by the stikes have hardly changed since 2017. This is despite ongoing contributions from members and employer contributions that typically include special deficit contributions. The main reason for the decline in assets held since 2021 has been the sale of liquid investments to meet LDI collateral calls. In terms of asset-backing, pensions are no better off today than they were in 2017. The trajectory of the asset valuations is represented by the dark blue line.

What has changed over the period are the liabilities,  which have more of less tracked the trajectory of the assets. The valuation of these liabilities is determined using the “best estimate basis” produces a smoothed view of assets and liabilities and is shown by the purple line.

This is not the view that USS took of its assets and liabilities. In 2020 it valued its liabilities at a cost based on investments (gilts) that were hardly growing, this made the liabilities look very expensive. The snapshot of the assets was taken at the time Covid was first hitting the world and this marked their valuations considerably below the average.

Looking at the funding level line (turquoise), the best estimate basis shows that average scheme funding has changed very little over the past six years. This is consistent with the liabilities and assets tracking each other.

If the USS had used this very simple means of assessing valuations, the shenanigans of the past five years would not have happened.

  1. Benefits would not have been cut
  2. Pension strikes would not have happened
  3. Students would have got a better education
  4. All this restitution would not need have happened.

There are still people on the internet who exclaim “when will the USS ever learn”. These people have said for some time that the USS should not stay open as a defined benefit scheme but only offer a defined contribution for future service. They are entitled to this opinion.

But today is a day of victory. Victory for smoothed valuations, victory for common sense and victory for the members of USS for whom all the strikes have got them back what should not have been taken from them – in my opinion!

So I’m making  myself a large cup of coffee to celebrate the outcome of all that has happened and wish USS, UUK and UCU a more peaceful and academically productive next five years.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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