In response to both Universities UK’s (UUK) and University College Union’s (UCU) broad support for the Joint Expert Panel’s (JEP) recommendations the USS Trustee has confirmed its view that that the most appropriate way to allow these views to be taken into account is for the 2017 valuation to be concluded, and for the USS Trustee to then conduct a new valuation as at 31 March 2018 to incorporate issues raised by the JEP.
This approach requires two consultation processes by UUK to be able to respond to USS on behalf of the USS employers. For the 2017 valuation consultation is required on the Schedule of Contributions (SoC) and the Recovery Plan. For the 2018 valuation a consultation will be needed on the Technical Provisions and the Recovery Plan and this will be returned in February.
The University of Bath response to the 2017 valuation consultation is shown below. This has been agreed by the University Executive Board.
As we have indicated in previous communications our University is broadly supportive of the Joint Expert Panel (JEP) proposals as a basis for providing a financially sustainable and valuable member benefit and as a means to resolving what has been a protracted and damaging dispute.
We understand that the Universities Superannuation Scheme (USS) Trustee is obliged to complete the 2017 valuation. Introducing a 2018 valuation as means to consider the JEP recommendations seems a sensible approach.
It has been clear through the dispute that there has been a lack of common ground on the scheme valuation. The JEP proposals have provided a level of common understanding and broad agreement on a way forward.
We are concerned that the completion of the 2017 valuation prior to the 2018 valuation will cause concern to members who will be uncertain of the level of contributions that will be payable. It may also raise concern about whether the JEP recommendations will be implemented.
To minimise the uncertainty to our staff who are USS members we support the suggestion made by Aon not to finalise the 2017 valuation as planned and instead implement an interim contribution schedule which will see contributions increase as planned from April 2019 until such time as the 2018 valuation is agreed. This will see employers pay contributions of 19.5% and employees 8.8%.
We note that whilst this is a more complex solution, there are precedents. We consider that this approach recognises the funding needs of the scheme and will avoid the potential timing issues which could result in significantly higher contributions in the event that the 2018 valuation is delayed.
We understand that the adoption of an interim approach would not affect the current deficit recovery contributions (2.1%) as the 2017 valuation would not be formally agreed until the 2018 valuation is completed. At this point the 2018 valuation would supersede the 2017 valuation and the deficit recovery payments (DRC) agreed as part of the 2018 valuation would be implemented.
In the event that the interim approach is not adopted we do not support the increase in DRC’s to 6%. The 2014 valuation included an assumption of asset outperformance which has not been made in the 2017 valuation and which would lower the DRC rate. The recovery plan assumptions need to be ‘appropriate’ whereas the Technical Provisions need to be ‘prudent’ which would support a level of outperformance being assumed in this instance. We support retaining the DRC’s at their current level of 2.1%.