DB & DERISKING
Academics union questions regulator’s oversight of USS
By Stephanie Hawthorne | November 18, 2019
Academics have expressed disquiet over the role of the Pensions Regulator in the governance in one of the largest occupational pension schemes in the UK.

In a submission to the Work and Pensions select committee inquiry on the work of TPR, the University and College Union has raised concerns over the watchdog’s oversight of the 2017 and 2018 valuations of the Universities Superannuation Scheme.

The document also criticised the regulator’s handling of the dismissal of Jane Hutton, a non-executive director of the scheme’s trustee board who was investigating the allegation that the plan’s deficit was overstated.

In written evidence published by the committee earlier this month, the UK’s largest union for academics staff states: “TPR has not responded adequately to criticisms that were levelled by the first Joint Expert Report. These concerned TPR’s pessimistic assessment of the employer covenant and the projected growth of the scheme, and the timing and consequences of its interventions in the valuation process.

“TPR has also struggled to deal properly with similar concerns raised by Professor Hutton, who has highlighted a lack of transparency and rigour in the way USS conducts its business.”

TPR tends not to search for, acknowledge, or follow up on evidence that may support USS’s viability as an open defined benefit scheme
UCU submission to Work and Pensions Committee
The submission pointed to the findings of the Joint Expert Panel, chaired by Joanne Segars, which judged the regulator not to have taken appropriate consideration of the “last man standing” scheme’s immaturity, positive cash flows, and strong covenant in its dealings with stakeholders.

The JEP report also said TPR’s early involvement in valuation discussions limited negotiating options and had an undue impact on the outcome of these talks.

The union believes the watchdog “disregarded the short and long-term consequences of the 2016 benefit changes, which stood to make the scheme’s liabilities significantly more manageable”.

2017 intervention ‘sparked derisking’

According to the UCU, a letter sent by the regulator during an employer consultation on the appropriate discount rate for the scheme proved “decisive”.

The submission stated: “That employer consultation was conducted in a notoriously slipshod manner and presented to USS in a misleading way, with the suggestion that employers had thrown their weight behind a more risk-averse valuation when in fact they had not. We are not aware that TPR has shown any interest in the abundant and irrefutable evidence that this consultation misrepresented employers’ risk appetite.”

The statement continued to allege that it was this “flawed” consultation that persuaded trustees of USS to bring forward plans for derisking the scheme, with a knock-on impact on the size of the plan’s deficit and the contributions needed to maintain it.

“Stakeholders are still living with the consequences of these modifications… TPR must take some share of the responsibility for this outcome,” the union said.

“TPR tends not to search for, acknowledge, or follow up on evidence that may support USS’s viability as an open defined benefit scheme. Instead, it takes a strong interest in evidence that appears to point in the other direction, even when that evidence is flawed, incomplete, or misleading.”

In a letter published on November 5, TPR chief executive Charles Counsell defended the watchdog’s stance: “Though we were concerned regarding the representation of TPR as a ‘gilts-plus regulator’, the presentation of our concerns by USS that the previous valuation had been at the limits of acceptability in terms of the level of risk was an appropriate reflection of our views.”

A TPR spokesperson emphasised to Pensions Expert in a statement: “We engaged closely with USS and all other stakeholders during the 2017 and 2018 valuation and will continue to do so. We want all parties to understand the risks in the scheme and agree a long-term solution to the funding challenges facing it.”

Whistleblowers’ protection

The submission also accused the regulator of inadequate protection of whistleblowers, responding to the dismissal of Professor Hutton.

“It is particularly dismaying that TPR does not have a formal policy for dealing with whistleblowers. In particular, TPR may decide to investigate whistleblowers’ complaints insofar as they concern matters of scheme governance and may require TPR to use its powers, but TPR apparently does not provide resources to support and protect the individuals who make those complaints,” the union argued.

Govt agrees to pension guarantees for mineworkers
The government has agreed to guarantee members of the Mineworkers’ Pension Scheme an annual increase in line with the retail price index, even if there is a deficit in the pension fund.
Read more
Responding to these criticisms, a TPR spokesperson told Pensions Expert: “Whistleblowers are an important source of information for us. We have robust processes in place to ensure we give proper consideration to any whistleblowing reports that we receive.”

Dr Sam Marsh, branch president for Sheffield UCU, countered: “While the regulator has had much interaction with those running USS, its engagement with the scheme’s members has been sorely lacking. Those who have raised concerns have found it very difficult to get responses or action.”