Jane Hutton USS whistelblowing

Regulators probe claims about university pension plan
Watchdog examines whistleblower complaint about obstruction on deficit estimate


Josephine Cumbo in London May 21st 2019

Regulators are probing claims by a whistleblower that she was obstructed in her efforts to establish whether the deficit in the UK’s largest private sector pension plan was exaggerated.

The Pensions Regulator is examining a complaint by Jane Hutton, who has served on the trustee board overseeing the Universities Superannuation Scheme, that she was frustrated in her efforts to find out if the deficit was put at too high a level in 2017.

The regulator is also in talks with the Financial Reporting Council about whether the USS valuation of the pension scheme — which has 420,000 members — complied with actuarial standards.

The USS reported in November 2017 that it had a £7.5bn deficit based on actuarial rules, and this prompted the universities to propose that the defined benefit pension plan offering generous retirement benefits be phased out.

They recommended switching people to a defined contribution pension plan: riskier arrangements in which benefits are subject to the performance of stock markets.

The proposed shake-up prompted the largest wave of industrial action on university campuses in decades as thousands of academics went on strike last year at more than 60 higher education institutions.

Professor Hutton, a statistics expert and non-executive director on the USS trustee board, told the Financial Times: “My concerns have always been for the members [of the USS] and the employers to ensure they have a high-quality valuation that is appropriate for a scheme of this size.

“My attempts to undertake my fiduciary duties as a trustee, to investigate concerns I had about the [November 2017] valuation, and to challenge advisers, met with repeated delays. I suspect the deficit has been substantially overestimated.”


Prof Hutton said she first became concerned in January 2017 about the accuracy of the calculations used for the planned valuation of the pension scheme.

In May 2017, she identified a calculation error in the “retirement rate” — which had the effect of inflating pension costs because members were assumed to be retiring earlier than they did in practice.

Prof Hutton said she also sought to scrutinise wider assumptions used for the pension scheme valuation, including on mortality and salary, which can influence the size of any deficit.

In July 2017, Prof Hutton said she expressed serious concerns to the trustee board that the assumptions proposed for the valuation would provide misleading estimates.

She claimed that in November 2017 David Eastwood, chair of the trustee board, instructed Bill Galvin, USS group chief executive, to delay dealing with her requests to be provided with data until the panel had a chance to consider the matter.

Prof Hutton then complained to Sir David that it was neither appropriate nor legally compliant for the board or the USS executive to impose restrictions on the information or documents supplied to trustees.

In March 2018, Prof Hutton raised her concerns formally with the Pensions Regulator and the FRC.

In September last year an independent expert panel — commissioned by universities and trade unions to review the assumptions used in the pension scheme valuation — concluded that its position was not as bad as the USS found in 2017.

The USS, based on a new valuation of the scheme, estimated in January this year that it had a £3.6bn deficit.

The universities have dropped their proposal to switch members to a defined contribution scheme. However, universities and members of the defined benefit scheme have been asked to make higher contributions to fix the deficit.


Prof Hutton said that she felt under “considerable pressure” from the trustee board and USS executive, and therefore had agreed last week to recuse herself from any panel meetings.

A USS spokesperson said: “The composition of the trustee board is designed to elicit a broad range of views and we take every step to encourage healthy debate and constructive challenge to support robust decisions . . .

“The trustee company takes any concerns raised by directors very seriously and seeks to address them in accordance with best practice.

“No material issues have been raised by any of the independent experts engaged by the trustee in either carrying out or reviewing the 2017 valuation.”

The spokesperson added that the USS’ independent experts included actuarial, covenant and legal advisers. Several actuarial assumptions were reviewed by third parties and academics, he said.

The Pensions Regulator said it did not comment on specific pension schemes unless it was appropriate to do so.

“Where concerns are shared with us about the governance and administration of a pension scheme, we will seek to discuss these with the trustees before considering any action we may take,” it added.

The FRC said: “As with all reports and accounts of companies that fall within the FRC’s remit, if there is evidence to suggest non-compliance or audit failures we would review in accordance with our usual procedures.”