Cambridge Colleges coordinated a rejection of USS’s proposed level of risk

Leaked email also reveals push for DC motivated by ‘last man standing’ worries

[This post is a follow-up to “Oxford’s and Cambridge’s role in the demise of USS”.]

A leaked email to the Bursars of the 31 Cambridge Colleges, from the Pensions Sub-Committee of an intercollegiate Bursars’ Committee, conveys a harshly negative assessment of the level of investment risk that USS proposed in their September valuation:

In the opinion of the Employers body UUK, and now crucially also of the Pensions Regulator (PR) … the [USS] Trustees are overestimating the medium term credit quality of the Higher Education sector, and using very aggressive assumptions to provide options for the next set of benefits and contributions….

The email, which is dated 21 September 2017, also confirms my claim here that the push for DC for future service was motivated by ‘last man standing’ fears. The Sub-Committee “advocates a strong move to DC now”, with the upshot that “future investment risk and return would fall on the employees”. The Sub-Committee also refers to a suggested common line of reply to the consultation, which expresses a strong preference for “Sectionalisation of the Scheme, whereby the stronger covenants in the Sector such as the Colleges and University would no longer act as ‘last men standing’ in the worst case, and which would actually be achieved for future service by a move to DC” [my emphasis].

At this “important moment in the evolution of USS”, the Sub-Committee “recommends that all Colleges aim to respond to the consultation” in a suggested manner that would bring their responses in line with the University’s response.

In addition to the Universities of Oxford and Cambridge, 66 higher education institutions, most of them universities, were balloted for industrial action by UCU in December and January. But USS reports that 116 institutions responded to the UUK consultation. Given the coordination and prompting of the email from the Sub-Committee, it is likely that Cambridge Colleges are among many of the 50 higher education institutions beyond the 66. In line with common practice, it is likely that Oxford also coordinated a response among its Colleges.

In USS’s response to the UUK employer consultation on the September valuation, much is made of the fact that “a significant minority (42%) of survey respondents wanted less risk to be taken — including some of the very largest employers”.

If it turns out that this 42% figure was inflated by the inclusion of a number of Oxford and Cambridge colleges, USS’s decision in November to speed up the ‘de-risking’ of the portfolio was based on a misleading UUK prospectus regarding the level of opposition among employers to investment risk. It should be a special concern for USS members beyond Oxford and Cambridge if these two institutions exercised such disproportionate influence. [Update: Click this tweet by the FT pensions correspondent, and also read the thread below it, for confirmation that the 42% figure was significantly inflated by inclusion of the colleges.]

[Click this link for the text of the email in full from the Cambridge Pensions Sub-Committee.]

Professor, Dept. of Philosophy, Logic & Scientific Method, LSE

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store