USS at risk of missing 2020 valuation deadline

Speaking to the USS’s sponsoring employers during an online event in December, Mr Galvin said the scheme had informed the Pensions Regulator that it was unlikely to submit its new schedule of contributions by June 30 2021 as required.

Delays to constructing a report for the near-£80bn scheme’s Joint Negotiating Committee — which consists of employer and employee representatives and decides upon contribution levels — meant the timeline was “challenging”, Mr Galvin said. 

“We know that unless the JNC concludes on an answer [on contribution levels] immediately on receipt of this report — and, perhaps, even if they do — we are likely to miss the statutory deadline of June 30,” he explained. “We have informed the regulator of that and wait for its response.”

In addition, default contribution increases scheduled for October 2021 were “close to being an inevitable occurrence”, he warned, as to avoid these would require a new schedule of contributions to be agreed based on the 2020 valuation.

Shortly before Mr Galvin spoke on December 10, Universities UK, the USS employer representative body, submitted a proposal for how its members would support the USS’s covenant.

While he acknowledged the difficulties in amalgamating a “very wide range of views” on aspects such as affordability, covenant support, risk appetite, and benefit structures, he warned there was a “real risk” of the scheme and its stakeholders ending up with “a lowest common denominator” position. 

“It’s unfortunate from all our perspectives that we are not further advanced in this discussion,” Mr Galvin said.

While the UUK proposal was “very helpful” in pushing the report to the JNC forward, he said it was “some way short of what we had asked for — and, indeed, what we had hoped for”.

‘Time is of the essence’

He added: “If this is the employers’ best and final offer on covenant support measures, this process will be more challenging than, perhaps, we had hoped, but we understand employers must interpret their priorities and preference for the commitment of their resources. 

“We continue to believe the sector has the capacity to support the proposition… that the scheme is supported by a strong covenant. A critical component of that is the employers’ willingness to provide the commitments that can confirm this.

“It feels like there is some way to go on this process, yet it’s also clear that time is of the essence.”

Mr Galvin emphasised that the USS trustees had been “very clear on what’s required to support risk-taking” in a way that would in turn support lower contribution levels, and on the “key measures and metrics” that stakeholders needed to consider in order to make decisions.

Academic staff and universities have been at loggerheads over contribution rates to the USS since 2018 when UUK called for the defined benefit section of the scheme to be closed. This triggered nationwide strikes among lecturers and other staff.