Regulator hits back over influence on USS valuation

The regulator said its influence on USS’s valuation, described as one that appeared to be "disproportionate" by the select committee in reference to a report by the USS Joint Expert Panel, was "commensurate with USS being the largest private pension scheme in the UK".

USS’s 2017 valuation identified a £7.5bn funding deficit and prompted a rise in employee contributions, but was later identified as flawed and subsequently revised to £3.6bn.

The JEP's September 2018 report said TPR's interventions "may have steered" employers' decisions, and referred to its decision to downgrade the opinions of two separate covenant advisers contracted by the USS trustee. Responding to a June letter from select committee chair Frank Field, the watchdog said its approach sought to avoid reopening agreements made between the trustee and sponsor by advising on what it considers acceptable.

Charles Counsell, TPR’s chief executive, wrote: “We believe our level of engagement is commensurate with USS being the largest private pension scheme in the UK, with a very large membership and significant liabilities and is entirely appropriate in light of our statutory objectives.”

To avoid further delay and because of the complexity of the various issues that we were looking at, we ultimately decided to separate the whistleblower's concerns from other pieces of information

Charles Counsell, The Pensions Regulator

Blowing the whistle

Mr Field’s letter also demanded answers on why the regulator took five months to act on information from USS whistleblower Professor Jane Hutton, a statistician appointed to the USS trustee board in 2015, who claimed she was obstructed from uncovering the scheme’s true liabilities. Professor Hutton was suspended from USS's trustee board in light of comments made about the valuation.

Mr Counsell said: “Although conscious of the need to raise the whistleblower issues with USS, we also had a number of other USS workstreams to work through, some of which directly related to the whistleblower concerns.

“In practice, to avoid further delay and because of the complexity of the various issues that we were looking at, we ultimately decided to separate the whistleblower's concerns from other pieces of information,” he continued.

Professor Hutton has been contacted for comment.

Mr Counsell also outlined the regulator's principles and approach to deficit reduction contributions to the committee, explaining that even for employers with strong or tending-to-strong covenants, "we generally expect a strong funding target and recovery plans to be relatively short. We define short in this context to be shorter than the average recovery plan length of around 7 years”.

A University and College Union spokesperson said: “Following the criticisms made by the JEP of TPR's role in the 2017 valuation, UCU believes that the regulator must support all parties in agreeing a way forward for the scheme that protects members’ benefits without unjustified contribution increases.”

UCU, which coordinated walkouts at 65 universities in protest at changes to USS last year, is balloting for further strike action over pay and pensions between September 9 and October 30 this year.

The spokesperson added: “The Pensions Regulator’s response still leaves a number of questions unanswered with regard to their approach to dealing with whistleblowers’ concerns about USS.”