Response to a short consultation by Universities UK on potential modifications to the indicative outcome to the 2020 valuation - 07/07/21

Cardiff University's preferred option in relation to potential modifications to the indicative outcome to the 2020 valuation is as follows:

Option A

Accept the USS Trustee’s counter proposal and provide backing for the modified outcome (including the 10% threshold for pari-passu security, and no gap between the ending of the current short-term moratorium and the commencement of the rolling 20-year moratorium) and continue discussions with the USS Trustee to find a way that the 0.5% difference can be bridged in a way which might be acceptable.

Over the weeks ahead we would engage further with the USS Trustee, employers and UCU on the options to address the additional 0.5% in contributions. This could for example involve further adjustments to the USS Trustee’s assumptions, adjustments to the proposed benefits package, accept higher contributions or changes to the plan for implementation. Given the need for further exploration, it is too early to specify the particular approach at this stage.

This consultation puts employers in a very difficult position because UUK are asking employers to make choices about potential outcomes that the members should be asked – namely Option A for a reduction in benefits or Option B for an increase in contributions.

As employers we support the enhanced covenant arrangements proposed by USS but we are concerned about the impact of benefit changes on members.

In accepting Option A we have some significant reservations :

• As we have indicated in previous responses we remain concerned about the 2020 triennial valuation on which these changes are based. We note the recent Financial Times article (27^th June 2021) in which Martin Wolf says “… on sensible assumptions, the scheme is in comfortable surplus… The only assumption under which the USS scheme could fail is a permanent end of economic growth. In such a world, even government debt now thought “safe” would cease to be so.”
• We support an urgent post-valuation independent governance review of the scheme and draw your attention to our previous views on governance in our response to the JEP 2 consultation, including addressing the large group of individual scheme members who are not members of the UCU and therefore are not represented in the discussions.  The scheme should look at appropriate mechanisms for more inclusive and effective engagement with all its members to ensure that those for whom joining UCU is not an option and those who chose not to join have representation.
• The Trustee should create a new valuation board, as recommended by JEP, building on the work of the VMDF. This should also provide an opportunity to consider alternative representative bodies.
• A post-valuation independent governance review of the scheme should include the role of the JNC within its scope, specifically to ensure that decisions on benefit or contribution changes are not determined by the Chair’s casting vote.
• Any new governance framework should seek to facilitate a more transparent approach to valuations whereby the evidence for valuation assumptions and calculations, including underpinning data, should be made publicly available to ensure proper engagement of stakeholders.
• Urgent consideration should be given to flexible and lower cost options to address the scheme’s high opt-out rate and the development of a Conditional Indexation model for consultation with employers and members.