The Universities Superannuation Scheme, London, breached a funding trigger as a result of market volatility caused by the coronavirus, requiring it to file a notice with The Pensions Regulator.
On a self-sufficiency basis the £68 billion ($88.7 billion) pension fund's liabilities stood at £105.6 billion as of March 12, said a letter addressed to heads of participating USS institutions and signed by group CEO Bill Galvin, and seen by Pensions & Investments. On a technical provision, basis liabilities were £80.3 billion.
The funding measure that was breached is calculated as a ratio of underfunding to the present value of 10% of employer payroll contributions for 30 years. When that ratio exceeded 85% for five consecutive business days, USS had to inform TPR.
"We expect early guidance on how to approach matters relating to current conditions in the month of April," Mr. Galvin said in the letter.
TPR declined to comment on the breach.
"As a long-term investor, we have agreed with our sponsors a long-term approach to funding the scheme," a USS spokesman said in an emailed statement. "Our pension promises are secure because they are supported by the strength and longevity of employers in the U.K. higher education sector. It is important these sponsors are clear on the funding position and on their commitment to the scheme should our assumptions prove inadequate."
Regarding the virus itself, Mr. Galvin wrote in the letter: "Our current view is that the impact of COVID-19 will be very significant over the near-term. The impact is more likely to be less material as we look further out."
He does not expect as deep a permanent reduction in inflation and interest rates as signaled by some market indicators. "However," Mr Gavin said, "it is impossible to be confident at this point on the long or short-term impacts."