USS member satisfaction at ‘record low’ as contributions rise

Less than a quarter of members (24 per cent) said they had a “good” or “very good” relationship with the UK’s largest pension scheme, down from 31 per cent last year, the report found.

The scheme said it was planning further improvements to its “day-to-day services to make them more personalised”, in addition to enhancements made to its communications policy, website and member portal in the past year. 

A spokesperson for the USS told Pensions Expert: “Members’ views and experiences of engaging with us and our services are positive, but it is entirely understandable for the funding challenges we face, and the debate surrounding them, to have influenced how they feel overall.

“We are in no doubt that contributions have had to increase to ensure the valuable promises made to our members by their employers can be kept. Historically low interest rates, increased life expectancy, greater regulation, and volatile financial markets have made promises of a set retirement income for life more expensive.”

In his comments for the report, USS chief executive Bill Galvin said his team were “concerned” about the drop in member satisfaction, adding that they shared in members’ “frustrations at requirements for increased contributions”, despite investment performance being above target.

USS’s total assets fell to £66.5bn from £67.4bn at the end of March 2019, reflecting a net investment loss of 1.7 per cent for the year — although this was above its performance benchmark, which fell by 5.4 per cent.

The University and College Union — which has been in dispute with the scheme and employers over increases to contributions over the past few years — highlighted the “record low” satisfaction with the scheme.

A union spokesperson told Pensions Expert: “From intransigence on timetables and the valuation, to suppressing a report about governance at the heart of the scheme, there has been little to instil confidence in USS members this year.”

However, the scheme highlighted other member engagement data that showed most USS savers were pleased with level of service they received when interacting with staff, with 88 per cent rating the service as “good” or “very good”.

Remuneration

The UCU also drew attention to salary levels within the USS’s team. The annual report showed that the number of staff being paid more than £100,000 a year rose from 131 to 144.

In addition, the report revealed that Mr Galvin was awarded £212,009 as part of a long-term incentive plan based on achieving pre-agreed performance targets, on top of a £30,000 pay increase.

A USS spokesperson said: “The remuneration of all USS employees is benchmarked against comparable roles, under the oversight and scrutiny of the trustee board, and reflects the skills and expertise required for each role and recruitment in a competitive financial services sector.”

The annual report cited data from CEM Benchmarking that showed the scheme’s spending on wages has fallen year on year.

Having an in-house investment team saved the scheme £49m compared with a peer group average, CEM Benchmarking’s analysis showed. In addition, over five years to December 31 2019, the scheme’s investment outperformance added £462m of “value” to the fund, the USS stated.

The report also detailed that while the cost of the staff’s long-term incentive plan rose year on year, this was due to the scheme’s investment outperformance. Estimates of future incentive scheme payouts increased as a result of the USS outperforming during the market volatility of the first quarter of 2020, it showed.

Investment management costs rose when compared with last year, largely as a result of asset growth and transaction costs, USS said. Total investment costs reached 39 basis points, up from 34bp in 2018-19 but 8bp lower than CEM Benchmarking’s peer group average.

Funding deficit

The results came as the USS reported a £12.4bn funding deficit as of March 31 2020, largely as a result of falling interest rates and “the devastating impact of coronavirus on global markets”.

The deficit figure was based on liabilities updated from the scheme’s 2018 valuation, amid an ongoing dispute between members and employers as to how to calculate the USS’s future pension promises.

The schemes defined contribution section, the USS Investment Builder, reported losses in its default funds for the 12 months to March 31 2020, but have outperformed since inception. USS Investment Builder’s total assets reached £1.1bn.

The USS trustee board has begun work on the 2020 valuation process based on data at the end of March. However, outgoing chair of trustees David Eastwood emphasised that the valuation would be designed to reflect the scheme’s performance through the recent market volatility, rather than just the “snapshot” stated in the accounts.

“The 2020 valuation is providing us an opportunity to take a calm and considered approach to assessing conditions and any changes to the long-term outlook,” Sir David said.

“We will be able to review and reflect ‘post-valuation experience’ as we work through the process. Given the challenging context of the 2020 valuation, this will be even more challenging than usual.”