A group of more than 1,000 UK academics said an inquiry “is urgently needed” into the £60 billion ($76.2 billion) University Superannuation Scheme (USS) after one of its own board members said she was stopped from investigating whether the fund’s deficit was as large as it claimed. The group made its demands public in an open letter to the Financial Times.
“We believe the conduct of USS valuation over the last two years has brought the scheme into disrepute,” said the letter. “An enquiry is urgently needed to obtain the necessary information to assess the USS’s claims, review the conduct of the USS executive, trustees, and The Pensions Regulator, and ultimately to rebuild members’ and employers’ trust and confidence in the scheme.”
The letter added that “it would be appropriate for a select committee of parliament to investigate.”
The issue began when Jane Hutton, a professor of statistics at the University of Warwick and a board member of the USS since 2015, said she was prevented from trying to determine whether the largest private sector pension plan in the UK was exaggerating its deficit.
“My attempts to undertake my fiduciary duties as a trustee, to investigate concerns I had about the [November 2017] valuation, and to challenge advisers, met with repeated delays,” Hutton told the Financial Times. “I suspect the deficit has been substantially overestimated.”
In response to the allegations, USS CEO Bill Galvin, and David Eastwood, chair of the trustee board of directors, said in a statement that the organization took Hutton’s concerns “very seriously” and “have sought to address them in accordance with best practice, and have expended very significant resources in responding to her questions.”
They said that extensive information, analysis, and third-party assurance have been provided over several years as they have worked with Hutton to respond to her requests.
“No material changes were made to our valuation outcome as a result of any of these activities,” wrote Gavin and Eastwood, “nor have any material issues been raised by any of the expert advisers engaged by the trustee in relation to the 2017 valuation.”
The USS reported in its 2017 annual report that its deficit had risen to £12.6 billon from £5.3 billion in 2014 as a result of a significant decline in yields on low-risk UK government bonds during that period. However, it said that since then, the funding assumptions have been updated, and the deficit is now estimated to be £7.5 billion which, with assets of £60 billion, gives the plan a funding ratio of 89%.
“The trustees have a fiduciary duty to act in the interests of scheme members,” said the letter from the academics. “If the trustees or the USS executive are unable to act in the interests of scheme members, then they should resign,” they wrote, adding that “if the employer and union appointed trustees are failing to act in the interests of the members, then it is the responsibility of UUK (via the Employers Pensions Forum) and of the UCU to replace the trustees.”