Politicians to probe UK’s biggest pension fund

Parliamentary committee to probe the UK’s biggest pensions scheme over record funding shortfall

A parliamentary committee would probe the UK’s biggest pensions scheme over its record funding shortfall. The chair of the Work and Pensions Committee, Frank Field, has written to the Universities Superannuation Scheme’s (USS) trustee board in this regarding its plans to plug a £12.6bn (€13.7bn) deficit. The Work and Pensions Committee is a group of politicians from the UK’s lower house which includes politicians across parties. Field has also written to the Pensions Regulator (TPR) and Universities UK, which represents employers in the sector, requesting information about the situation. Apart from his letters to TPR, USS, and Universities UK, Field wrote to Jo Johnson, the universities minister, and recommended the involvement of the Office for Students (OfS) in the scheme’s governance.

“I would suggest that [OfS] looks in particular at the performance of those vice-chancellors who seem to have been steering university pension schemes into trouble,” Field wrote.

USS chief executive Bill Galvin warned that expected lower future returns would raise the cost of future pension benefits. His warning came after the publication of the scheme’s latest annual report. Galvin said USS’ position was “within the affordable limits of the employers” following the publication of the annual report. Last year, USS launched a hybrid benefits structure in a bid to reduce the expected future costs of the scheme. Commentators have expressed concern that this could result in a rise in tuition fees for students.

In his letter to Sir David Eastwood, chair of USS’ trustee board, Field said:

“The large and growing funding gap gives rise to serious concerns about how USS intends to address this deficit and the implications for sponsoring institutions and their funding model. The prospect of students incurring higher tuition fees and student debt partly to cover the burden of historic [defined benefit] pension entitlements that they can never hope to enjoy in their own future careers is an important issue of intergenerational fairness.”

Field has asked for views of the parties concerned regarding the adequacy of recovery plans following the 2011 and 2014 valuations, as well as details of discussions between them and their views on the strength of the employer covenant. He also requested information about asset allocation decisions, interest rate and yield assumptions, and the proposed recovery plan as part of the scheme’s formal 2017 actuarial valuation.

The politician asked TPR for information about the role of USS chief executive Bill Galvin in discussions with the regulator. Galvin was chief executive at TPR for three years before joining USS in 2013.

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