Letter: The grand prize is to secure the cost of university pensions

At the Universities Superannuation Scheme, we agree with much of Martin Wolf’s analysis and prescriptions for the retirement system (“It is folly to secure pensions by making them unaffordable”, Opinion, 28 June).

The future is indeed unknowable. The cost of the absolute security of pensions promised today, but due in several decades, is indeed extremely high.

The economic cost of funding new “guaranteed” pensions has increased over the past decade, due to rising asset prices and lower expectations of future returns through a well-diversified and sufficiently secure portfolio.

This is as true for the USS as it is for other funded defined benefit (DB) plans and even for “unfunded” government sponsored pension plans.

The USS is also a very large program compared to its sponsoring employer organization, which includes a wide range of academic institutions. This means that underestimating the cost of providing its pensions would prove detrimental to the future of higher education as well as to the pension security of our members.

The pandemic rocked financial markets in 2020, but we made thoughtful adjustments to our funding plan to compensate. The pension regulator – whose role is to assess whether our funding proposals comply with our obligations under the law – has warned that the latest proposals, valued at 31.2% of salary, are on the margins of compliance .

Wolf’s point of view is that risk sharing is the way to tackle today’s challenges. As a “hybrid” defined benefit / defined contribution plan, the amount of “guaranteed” pensions in US $ can be adjusted (upwards or downwards) to adapt to the evolution of cost and benefit budgets. risks and keep a precious retirement promise.

We are encouraged that our stakeholders are discussing responses of this nature and are keen to support discussions on how challenges can be managed and shared.

If we come to an agreement with the employers of universities and the union of universities and colleges – the main union for higher and higher education – the price of continuing to provide valuable pensions with a secure foundation, even in the economic climate. current, is at your fingertips.

Dame Kate Barker
Chairman, Universities Superannuation Scheme Limited Trustee Board
London EC2, United Kingdom


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