Automatic trigger warning
Unreasonable USS demands over ‘short-term risk and reliance’ are the biggest threat to a JEP settlement
In his blog post on USS’s 22 November announcement that they will be conducting a new valuation, CEO Bill Galvin voices renewed concern over what is known as “short-term risk and reliance”. The concern is that it would now be very expensive to exchange the scheme’s current portfolio, which is weighted towards return-seeking assets such as equities and properties, for a ‘self-sufficiency’ portfolio that is weighted towards gilts and other bonds.
USS, moreover, would like employers to enter into a legally-binding pre-commitment to automatic triggers of a rise in their contributions, in the event that it becomes even more expensive during the next few months or 2–3 years to purchase a self-sufficiency portfolio, as it might if the gilt yield falls. In the past, employers have rightly rejected such a demand, as has the union. Below, I link to a previous blog post, and to Twitter threads, in which I spell out how arbitrary and unreasonable this demand is and why and how it must be resisted.
First, I post a blog from November 2017 on this topic, whose title and subtitle are self-explanatory:
Why should it matter that we can’t afford to do what we have no reason to do?
A revised critique of USS on short-term risk and reliance
Below, I post my tweet threads on this topic, from most recent to least recent. Please click through to the linked tweet and also read the tweets below it.
UPDATE: In this thread on the 11 December tPR letter, I note that the regulator’s focus is on the TP deficit, rather than short-term reliance, as the trigger for an automatic increase in contributions.