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The UK Universities Superannuation Scheme valuations 2014-2023: gilt yield dependence, self-sufficiency and metrics

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  • Jackie Grant

Abstract

This review considers the Universities Superannuation Scheme (USS) valuations from 2014 to 2023. USS is a 70-80 billion GBP Defined Benefit pension scheme with over 500,000 members who are employed (or have been employed) at around 70 UK universities. Disputes over USS have led to a decade of industrial action. New results are presented showing the high dependence of USS pension contributions on the return from UK government bonds (the gilt yield). The two conditions of the USS-specific 'self-sufficiency' (SfS) definition are examined. USS data are presented along with new analysis. It is shown that the second SfS condition of 'maintaining a high funding ratio' dominates USS modelling to amplify gilt yield dependence, inflating the SfS liabilities beyond the regulatory requirements, and leading to excessive prudence. The Red, Amber and Green status of USS metrics 'Actual' and 'Target' Reliance are also examined. It is shown that Target Reliance tethers the cost of future pensions to the SfS definition and that Actual Reliance can simultaneously be Green and Red. Implications for regulatory intervention are considered. An aim of this review is to support evidence-based decision making and consensus building.

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  • Jackie Grant, 2024. "The UK Universities Superannuation Scheme valuations 2014-2023: gilt yield dependence, self-sufficiency and metrics," Papers 2403.08811, arXiv.org, revised Apr 2024.
    • Handle: RePEc:arx:papers:2403.08811
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    References listed on IDEAS

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    1. Woon K. Wong, 2018. "The Discount Rate Debate and Its Implications for Defined Benefit Pensions," Cardiff Economics Working Papers E2018/22, Cardiff University, Cardiff Business School, Economics Section.
    2. Jackie Grant & Mark Hindmarsh & Sergey E. Koposov, 2022. "The distribution of loss to future USS pensions due to the UUK cuts of April 2022," Papers 2206.06201, arXiv.org.
    3. David Miles & James Sefton, 2021. "How Much Risk is the USS Taking?," National Institute of Economic and Social Research (NIESR) Policy Papers 29, National Institute of Economic and Social Research.
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