On the go: In a leaked email to Universities Superannuation Scheme, The Pensions Regulator has expressed “grave concerns” over an option for finalising its 2018 valuation that could delay funding pressures into the future.
The email also indicated that a high degree of supervision of the scheme is being exercised behind the scenes.
The Universities Superannuation Scheme’s 2018 valuation update issued on May 9 includes three options for finalising the valuation, with option 3 mooting a contribution rate of 30.7 per cent, subject to a 2020 valuation.
Where a valuation discloses a funding deficit, the trustees must adopt a recovery plan which can ensure that the statutory funding objective is met
Mike Birch, the Pensions Regulator
In the letter dated May 15 to chair of trustees Professor Sir David Eastwood, Mike Birch, director of supervision at the regulator, writes: “Option 3, as we understand it, is predicated on the current affordability crunch being dealt with (in part) under a future valuation. We have grave concerns if this was used to justify delaying taking an action that otherwise the trustee would have taken in relation to the 2018 valuation.”
Mr Birch goes on to say: “It is a fundamental principle of the statutory funding regime that where a valuation discloses a funding deficit, the trustees must adopt a recovery plan which can ensure that the statutory funding objective is met … A recovery plan or any other material funding decision based upon the premise of future valuations addressing the issues revealed by a current valuation would be inimical to the purpose and effect of the legislation – as well as our guidance on this point. Should there be any doubt, Option 3 is not analogous to the approach the trustee took on the finalisation of the 2017 valuation.”
He added: “We would be very concerned if the trustee proceeded with Option 3.”
TPR also indicated that the statutory deadline of 30 June 2019 will likely be missed. Unless and until the 2018 valuation is finalised, the contribution changes previously announced under the 2017 valuation will be applied.
In reply, a spokesperson for the USS said: “We will be responding to the regulator, addressing the points raised, in due course.”
Universities UK, the employers’ group’s spokesperson said: “Our focus is on a timely completion of the current 2018 valuation which is acceptable to employers, members, the USS Trustee Board and The Pensions Regulator. We are confident that the USS Trustee Board is conducting business in line with its fiduciary responsibilities.
“The Joint Expert Panel is currently undertaking a second phase of work to consider matters relating to the next valuation. We would encourage any further views on valuation methodologies to be shared with this independent panel for consideration.”
