UK - Universities Superannuation Scheme (USS), one of the UK's largest pension funds, has seen its funding level increase by approximately 7 percentage points over the last year, bringing the scheme within reach of full funding, according to latest accounts.

The accounts, filed on behalf of Universities Superannuation Scheme Limited at Companies House, further reveal details of remuneration for the pension fund's in-house investment team, with the bonus payments criticised as "lavish perks" by a lecturer's union.

While the filing noted that USS has seen its funding level fall from 103% in March 2008, when the most recent triennial valuation was conducted, it estimated that its deficit had decreased noticeably between 2010 and March this year.

In the 12 months to March, the scheme's funding level increased by 7 percentage points to 98%, while total assets rose by more than £2bn (€2.3bn) to £32.2bn.

However, the scheme stressed the figure was an estimate based on 2008's funding, "adjusted" to reflect the fund's actual investment performance over the three years and "changes in market conditions", with the next formal valuation expected to be published in the coming months.

It further noted that, as of October this year, new scheme members will be entered into a separate part of the scheme as it shifts members away from final salary to a career-average approach - a change it said had cost £737,000 to implement.

The University and College Union (UCU) meanwhile attacked the level of bonus payments for the scheme's investment team in light of the benefit changes, singling out chief executive Tom Merchant for criticism.

UCU general secretary Sally Hunt said: "It is a little surprising to learn the chief executive has been rewarded to the tune of £50,000 for his efforts in a dispute that has not been resolved."

Hunt criticised the "lavish perks", accusing the scheme of employing a number of "tricks" to "misinform" members over the funding level of the scheme.

A spokesperson for USS defended the bonus payments, with ULU estimating each employee received more than £30,000 - as they were assessed over a five-year period, rather than being based solely on the past year's performance.
 
He said that an increase in staff numbers for its in-house investment team had also led to an increase in bonuses
 
"USS has been building its in-house investment team to meet its evolving requirements," he added. "There is considerable evidence that schemes with in-house investment teams tend to perform better than those that rely on outsourcing to investment managers. The bonus scheme helps us to attract and retain talented staff."
 
The filing with Companies House also made mention of plans to spin off the in-house investment team, based in London, into a wholly owned subsidiary by the end of the financial year, pending permission from the UK's Financial Services Authority (FSA).
 
"The project is driven by the need to be able to satisfy the corporate governance requirements of both the FSA and the Pensions Regulator (TPR)," USS said.
 
The company added that its current structure was unusual compared to the rest of the industry, as it involved the USS trustee company acting as scheme administrator and investment manager with oversight from both the FSA and TPR.

It added: "Creating a separate subsidiary for the investment management business, subject to FSA authorisation, will bring us into line with the structure used by most of our peer group institutions and one which is better suited to managing the increased scale and complexity of our investment activities."