USS pension deficit shrinks from £14bn to £1.6bn in two years as market soars

The head of Britain’s largest private pension scheme says its funding position is proving “resilient” after its £14bn deficit sparked a strike by thousands of university staff, with the scheme surging as the market soars. The funding position has shrunk to £1.6bn in two years.

The University Pension Plan, the industry’s main retirement plan with 420,000 members, said on Monday improved conditions could allow it to adjust to the controversial strike that sparked a strike by academics and other university staff, chief executive Bill Galvin said Monday. welfare cuts. .

The announcement sparked outrage among members who cut pension benefits in April.

In 2020, as the pandemic ravaged the stock market, the USS reported a deficit of £14.1bn when calculating its funding position for March of that year.

It argues that cuts to retirement benefits or increases in contributions are needed to fund the ballooning deficit caused by the dim outlook for the investment returns it needs to fund new pension obligations.

The changes, which took effect in April, prompted thousands of employees across dozens of campuses to participate in strikes and other industrial action. They claim the changes were unnecessary because it was unfair that the valuation occurred in March 2020 at a time when global markets were plunging.

In a monitoring update released on Monday, USS said the funding gap had narrowed to £1.6bn as asset prices surged more than its liabilities increased after the pandemic eased.

Its assets rose by £22.3bn to £88.8bn between March 2020 and March 2022, while pension commitment costs rose by £9.8bn to £90.4bn over the same period, narrowing the deficit to £1.6bn.

In an email sent to hundreds of university employers on Monday, Galvin said that while it was impossible to predict what the next official valuation might look like – due in March 2023, the update indicated the program’s financial health was “more Elastic and moving direction to the right”.

On Monday, Galvin, the former superannuation regulator, said that if the “positive experience” it has monitored in recent months becomes more mature, then “there is a chance that the next valuation will be better than the most recent one.” information”.

“If this situation arises, the Joint Negotiating Committee (part of the Program Governing Body) may consider increasing benefits or reducing contributions (or both),” Calvin wrote in an email to employers.

University and college unions, which represent many staff members, said the graduation of tens of thousands of students could be affected as a result of the strike action.

Staff at 21 universities took part in a flag boycott in the critical final term of the academic year.

UCU did not immediately respond to a request for comment on the monitoring report.

In a blog published on Monday, UCU national negotiating team member Michael Otsuka said the improved financial situation was a strong case that the April 1 benefit cuts should be reinstated.

He said UCU and UK universities, which represent the industry, should “strongly support” a request for USS to issue a new recovery plan based on an improved financial outlook.

UUK said the “healthier financial outlook” was “encouraging”.

However, it said this was due to recent changes in plans and market movements, and was only related to the “short term”. It said a more detailed assessment would be available in early July.

“We know new valuations will take months and divert attention from fundamental reforms,” ​​it said in a statement.

Sabina Gheduzzi, a lecturer at the University of Bath, tweeted: “To be fair, many members will be angry”.

Richard Reeve, a professor of population and ecosystem health at the University of Glasgow and a UCU campaigner, tweeted: “So #USSmess Of course, pension cuts are unnecessary! As pension fund funding conditions adjust, it’s time for @USSEmployers to admit their mistakes and support the JNC resolution to retroactively restore the April 1st benefit cuts! “



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