The Universities Superannuation Scheme (USS), the UK’s largest private pension scheme with assets worth approximately £82bn, has started its court battle today at the Court of Appeal against two university academics who have brought claims against the directors of the USS on failure to come up with a coherent plan to move investments out of fossil fuels.

Neil Davies and Ewan McGaughey claimed that commitments to international climate agreements mean that continued investment in fossil fuels is a huge investment risk, according to a statement by Leigh Day, the solicitors firm representing the pair.

“Pension scheme directors must have a credible plan to address these risks. They argue fossil fuel companies have assets that cannot be exploited if we are to comply with climate treaties such as the 2015 Paris Agreement,” the statement continued.

According to USS, “Prof Neil Davies and Dr Ewan McGaughey sought permission to bring a multiple derivative claim under common law against the directors of the trustee company of the scheme, in the name of the trustee company. In other words, they want to use the scheme’s money – which is there to provide members’ pensions – to fund the pursuit of their claims through the courts,” the scheme said in a statement.

In May 2022 the High Court blocked the lawsuit as a judge noted the claimants had “failed to show even a prima facie case” that would justify allowing any of their claims to continue.

Today Davies and McGaughey asked the Court of Appeal to revive the case which will review the judge’s original judgement and his findings, and consider whether it believes the judge was correct in his judgment. It will hear from both the claimants’ and the trustee’s legal teams.

The claimants’ law firm said “recent cuts to the pension scheme and the discriminatory impact this could have on younger women and black and ethnic minority members of the pension scheme will also come under scrutiny in the legal action”.

Davies, a professor of medical statistics at University College London, and McGaughey, a reader at King’s College London and expert in corporate law, claim the various failures by directors of the pension scheme are in breach of their duties to act properly within their powers, to promote the success of the pension scheme for the benefit of its members, to exercise independent judgement and not to put themselves in a position of conflict, under the Companies Act 2006.

In their Court of Appeal hearing the two academics will appeal for permission to bring a claim on behalf of the pension scheme against the current and former directors and a shadow director of USS for these alleged breaches of duty.

The claim is one of the UK’s largest crowdfunded legal actions and has attracted significant grassroots support from other pension members via an ongoing online fundraising campaign, according to Leigh Day.

Cuts to the pension scheme, exclusively for university staff, have prompted widespread controversy over recent years, including significant strikes across the university sector.

A statistical model developed by one of the claimants and his colleagues suggests that the pension cuts that the claimants are challenging in this litigation mean that an average scheme member, aged 44 earning £44,700 per year, can expect to accrue £156,000 less when they retire compared to the benefits they would have received were it not for these pension cuts.

The changes are thought to affect around 200,000 active scheme members and could make active members collectively worse off by £31bn, the solicitors added.

USS’s response

“We have been clear from the outset that the underlying claims Prof Neil Davies and Dr Ewan McGaughey are seeking the Court’s permission to pursue, and the scheme’s assets to fund, have no merit,” a USS spokesperson said.

“This has been supported by Mr Justice Leech’s detailed explanation for the rejection of their application for permission, and his subsequent rejection of their application for leave to appeal. We believe the Court of Appeal will endorse Mr Justice Leech’s earlier decision,” the spokesperson added.

To be clear, USS’s statement noted: ”This hearing is about what the legal tests for a common law derivative action are in connection with whether a case should even be allowed to proceed. The Court of Appeal will not be deciding whether the underlying claims the claimants would like to try to pursue are true.”


The lecturers want to challenge the USS directors’ management of the 2020 valuation, which reported a £14.1bn deficit for the scheme and resulted in cuts to university staff pensions. This deficit arose because the directors assumed implausibly low investment returns of 0.29% growth above CPI for the next 30 years.

By June 2022, the pension scheme was already reporting a surplus largely because these assumptions were changed, and yet the cuts have not been reversed.

Davies said: “The decisions the directors took during the COVID pandemic were obviously flawed and were called out as flawed in real-time as the 2020 valuation was being conducted.”

The academics also want to challenge the cuts to the rate at which members of the pension scheme have accrued benefits, based on the scheme’s valuation, which they say is likely to leave women employees, younger employees and black and ethnic minority employees worse off and amounts to indirect discrimination on the grounds of age, sex and/or race. They allege the change exposes the pension scheme to discrimination claims brought by affected members.

The pair also wants to challenge the “directors’ failure to control the pension’s rapid cost increases”, especially since 2007, the claimants’ solicitors noted. The pension saw its annual operating costs increase from £38m in 2007 (0.125% of the scheme’s net assets) to £160m in 2020 (0.236% of the scheme’s net assets). Had costs not increased, there would have been less need to cut benefits.

Finally, the claimants want to challenge the “directors’ failure to have an adequate plan for the risks the pension faces from climate change”, according to the solicitors’ statement. They say the continued investment in fossil fuels constitutes a risk of significant financial detriment to the pension.

Davies said: “The USS directors’ mistakes have led to a multi-billion-pound deficit for the scheme, which impacts hundreds of thousands of university workers across the UK. The directors need to reverse the unfair and unnecessary cuts and develop a credible plan to deal with the risks the scheme faces from climate change.”

McGaughey added: “We are determined to ensure everyone has a secure retirement and not let people’s pensions be squandered on rip-off asset management fees. And we’re determined to end the scandal of university pensions bankrolling gas, oil and coal when they have no future, they’re a terrible investment, and they’re burning our planet.”

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