On the go: Universities Superannuation Scheme chief executive Bill Galvin has defended the plan’s approach to valuing its liabilities, in a radio interview on the last planned day of strikes at Britain’s higher education institutions.
As university lecturers abandon their warm lecture halls for icy picket lines on Wednesday, Mr Galvin took to the airwaves to emphasise the fact that the 2018 valuation of the scheme had been accepted by the Pensions Regulator.
The projection, which showed a deficit of £3.6bn and generated a recovery plan of 10 years, is “a prudent estimate required by legislation”, the chief executive of the UK’s largest pension scheme told Radio 4’s Today programme.
Mr Galvin admitted that the scheme was 95 per cent funded with assets of £70bn.
He said: “The regulator has accepted our 2018 valuation proposal at the limits of what it is prepared to accept. It involves a level of payments now of just more than 30 per cent of payroll, which are due to increase by 4 per cent in November 2021, split between members and employers.
“The deficit is less than half the annual payroll of the employers who support the scheme so it is manageable,” he added.
Emphasising the extent of the challenges facing the scheme, Mr Galvin said: “If we were to insure that with an insurance company, and so remove all risk completely from the employers, the cost of that would be more than £60bn.”
This figure is more than “eight times the payroll and more than the net assets of the employers”, according to Mr Galvin. By contrast, using a best-estimate method to calculate funding, “which is a 50:50 chance, a flip of the coin of being able to pay these pensions, we say we would have a surplus of £5bn”.
He concluded: “We are running a 2020 valuation on March 31 next year that gives everybody a chance to get around the table again. We have done everything we can to look for innovative arrangements that might help to bridge that gap. Our job is to serve the sector and the stakeholders.”
Universities UK declined to comment.
