mast image

Special Report

Impact investing

Sections

USS chief defends scheme performance against ‘polarised agendas’

Related Categories

The chief executive of the UK’s largest pension scheme – the Universities Superannuation Scheme (USS) – has expressed alarm at the “confusion, concern and distrust” generated among its members as a result of commentary about the scheme’s funding position.

Commenting on USS’ annual report and accounts for 2017, Bill Galvin said that “whatever the contributions of others might have been in that outcome, we clearly failed to communicate simply enough, convincingly enough, or from a basis of sufficient trust, to make the key messages clear”.

USS would therefore review its process for the scheme’s valuation with employers, in particular “the early discussions regarding their risk appetite and capacity,” he said.

The 2017 valuation of USS led to the scheme proposing to close its defined benefit (DB) section to future accrual, which in turn led to strike action across UK universities and heated debate about the scheme’s approach to the valuation.

Group CEO Galvin said views of USS had been “pulled to and fro by the 2017 valuation and commentators with polarised agendas”.

“At various points we were accused of being reckless for taking too much risk in our investment strategy, or of being recklessly prudent for our plans to invest more in ‘safer bonds’,” he added.

Objective observers, argued Galvin, would find neither of these statements to be true, just as they would with regard to accusations the scheme was “creating ‘smokescreens’ to hide bigger funding problems” or “manufacturing” deficits.

Compared with many other private pension schemes, USS was “an excellent pension plan” and “doing a good job in difficult circumstances”, he said.

The figures

USS’ funding deficit fell from £12.6bn (€14.1bn) to £12.1bn as at 31 March, on a monitoring basis using 2014 valuation assumptions. The scheme has not yet completed its 2017 valuation due to the disagreement between universities and members. 

The ongoing 2017 valuation has reported a £7.5bn deficit (89% funded).

Its assets grew by £3.9bn to reach a total £64.4bn, the vast majority of which are assets in the DB section (£63.6bn).

Investments supporting the DB section of the scheme gained 6.2% over the year under review and 10.6% per annum over five years, which amounted to an outperformance of 1.4% and 0.8%, respectively.

The DB fund also outperformed UK government bonds by £5.6bn over five years to the end of March.

USS also highlighted its performance on value for money, noting that an independent assessment found it was able to achieve its five-year investment performance at a cost £61m less than that incurred by comparable pension funds in the latest 12-month period assessed.

Investment in internal investment capabilities, which was partly behind a £2.1m increase in staff wages, helped reduce overall investment costs, as a proportion of assets under management, to 31bps, 16bps lower than in 2013/4, according to the scheme.

Related images

  • USS

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2543

    Asset class: Search of an Asset manager / Advisor managing / Advising a risk-based equity derivatives overlay program.
    Asset region: Global Developed Markets Equities, Global Emerging Markets Equities, Swiss Equities.
    Size: CHF 700-2100 million.
    Closing date: 2019-06-17.

  • QN-2544

    Asset class: Transitional Real Estate Debt.
    Asset region: North America (USA/Canada).
    Size: $50-100mn.
    Closing date: 2019-06-17.

  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

Begin Your Search Here
<