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Pension Funds

U.K. pension committee chairman wants details on plan to fix USS deficit

Frank Field, the U.K.'s chairman of the Work and Pensions Committee, has asked officials at the Universities Superannuation Scheme and The Pensions Regulator for details on a plan to address the pension fund's £12.6 billion ($16.2 billion) deficit.

Mr. Field, also a member of Parliament, sent separate letters Aug. 14 to Lesley Titcomb, CEO at TPR; Janet Beer, president at Universities U.K., which oversees USS; and David Eastwood, chairman of the board of trustees at the Liverpool, England-based £60.5 billion USS, pointing out that the USS' pension deficit has more than doubled since the valuation in 2014, to £12.6 billion from £5.6 billion. The funding ratio has dropped in this period to 83% from 89%. A date was not provided for the most recent figures.

According to the letters, obtained by Pensions & Investments, USS adopted a 10-year recovery plan in 2011, later revised in 2017 to a longer 17-year plan due to a deteriorating funding position. Mr. Field warned in the letters that the 2016/2017 annual report already suggests “an ongoing deterioration of the (pension plan's) funding position” even though the 2017 report hasn't yet been published. Mr. Field added that USS could have the largest deficit of all U.K. defined benefit funds.

In light of this valuation, Mr. Field asked USS trustees whether existing recovery plans were adequate as well as how USS is planning to increase employers' contributions to repair the deficit without passing the cost onto students or taxpayers. Mr. Field also asked what financial assumptions were made about market conditions, including interest rates and yields, over the next decade.

In the letter to Ms. Titcomb, Mr. Field asked whether USS CEO Bill Galvin has had any discussions with TPR about the deficit during his tenure.

Mr. Field also separately wrote to MP Jo Johnson, who is the U.K. minister of state for universities, science, research and innovation, on Aug. 21 proposing that the investment returns of USS should be taken into consideration when deciding the director's remuneration.

“The prospect of students incurring higher tuition fees and student debt partly to cover the burden of historic defined benefit entitlements that they can never hope to enjoy in their own future careers is an important issue of intergenerational fairness,” Mr. Field noted in the letters.