The trustees of the UK university sector’s £60bn retirement fund are facing pressure from academics, including leading statistical experts, to explain a growing funding hole in the scheme.
More than 50 academics from the country’s top universities have signed a letter expressing concerns about “curious” assumptions used by the Universities Superannuation Scheme (USS), which proposes a large increase in their pension contributions.
In a letter published in the Financial Times, they urged the USS to publish in full the workings behind its most recent financial check of the giant retirement fund, which provides pensions for academics and has more than 390,000 members.
Signatories to the letter include David Spiegelhalter, president of the Royal Statistical Society and Cambridge university professor, and Dr Ben Goldacre, an Oxford academic who “specialises in unpicking the misuse of science and statistics”.
“We are concerned about the transparency of decision making in the USS pension scheme,” said the letter. “The USS has announced a substantial deficit but the data and methods they have published are very limited, making their conclusions difficult to judge.”
The USS plan valuation, which has been sent to 350 university employers and academic unions for discussion, said the deficit was just over £5bn, similar to the scheme’s last financial check in 2014, but the cost of funding future pension promises had increased by 35 per cent.
Academics have already made adjustments to deal with rising pension costs, including a switch in the calculation of their retirement benefits to a less generous career-average basis, instead of final salary.
To keep retirement benefits at their current level, contributions from both academics and university employers would have to rise from 26 per cent of employee pay to between 32-33 per cent, the USS has warned in the consultation published last month.
The letter said the USS had made a series of assumptions “that we find curious”, including that long-term investment returns for the pension scheme would fall by 40 per cent, and that academics’ pay would grow annually by 4.4 per cent.
“If the USS reports were academic papers, diligent editors would reject them,” said the signatories.
The letter was published as a separate petition, with 1,600 signatures, and was sent to Bill Galvin, group chief executive of the USS, calling on the scheme to show full workings behind the valuation.
“The USS is responsible for stewarding a large part of the wealth of many of those who signed and as such it is important that it demonstrates beyond doubt that its calculations and assumptions are accurate and well founded,” said Dr Sam Marsh of the University of Sheffield, who sent the petition to Mr Galvin.
The petition has also been sent to Frank Field, chair of the work and pensions select committee, who is probing the financial health of the scheme.
The action comes as the union representing academics has not ruled out industrial action after receiving an actuarial opinion last week that retirement benefits could be kept at current levels without the need for an increase in contributions.
“We are currently using the first actuarial report to inform our response to the consultation on the USS valuation, which will be published in due course,” said the University and College Union.
“At this stage we are considering a wide range of recommendations and possible options, and consulting our members on how best to defend USS.”
USS said: “The process we followed in carrying out the current valuation is far more transparent than any other pension scheme we are aware of — having held 30 formal meetings with employer and union representatives since June 2016.
“Employer and union representatives have, through our constitutional joint negotiating committee, been fully engaged on the details underpinning the trustee’s conclusions through detailed, technical discussions backed by formal papers and detailed analysis.”