Pay it forward

November 7, 2013

USS’ multibillion-pound deficit could leave staff footing the bill” (News, 31 October) reported allegations of a “black hole” in the Universities Superannuation Scheme and quoted the view that it might be a “massive Ponzi scheme”.

The author of these allegations, John Ralfe, Boots’ former finance director, left the firm in 2002: was this linked to the firm’s pension scheme adopting the same ideas that Ralfe now wants to foist on the USS?

A pension scheme is a form of social security that allows pensioners to maintain their standard of living in retirement. Its basis is a principle of intergenerational solidarity whereby the income of one generation is guaranteed by those who follow. It is both fair and sustainable because each generation supports the next - just as parents provide for their children (and as their parents provided for them). In families there is no attempt at an exact monetary calculation aimed at equalising transactions between generations. It is the same with pensions: they are a natural part of a caring society. Pensions are linked to salaries and therefore ultimately economic growth.

Viewed on the cash-in, cash-out principle, the USS is in good shape. Last year all its pension costs (£1.4 billion) were covered by contributions (£1.6 billion), with healthy growth in the return on investment (£4.6 billion) to cover future commitments.

That is the social model. Neoliberals such as Ralfe, whose philosophy was expressed by Margaret Thatcher when she told us “there is no such thing as society”, want to marketise everything in the belief that markets are efficient. They believe they can ignore the future, as long as every pension scheme is fully funded. But the calculations required to do this are highly problematic. Besides, markets are not efficient and cannot allow for fundamental uncertainty such as demographic change. They are no substitute for society.

Dennis Leech
Professor of Economics
University of Warwick

You've reached your article limit

Register to continue

Registration is free and only takes a moment. Once registered you can read a total of 6 articles each month, plus:

  • Sign up for the editor's highlights
  • Receive World University Rankings news first
  • Get job alerts, shortlist jobs and save job searches
  • Participate in reader discussions and post comments
Register

Have your say

Log in or register to post comments

Featured Jobs

Reader in Politics and Policy

St Marys University, Twickenham

Engineer

Cern

Professor of Anthropology

Maynooth University

Preceptor in Statistics

Harvard University

Postdoctoral Fellowship in Electrochemistry

Norwegian University Of Science & Technology -ntnu
See all jobs

Most Commented

Doctoral study can seem like a 24-7 endeavour, but don't ignore these other opportunities, advise Robert MacIntosh and Kevin O'Gorman

Matthew Brazier illustration (9 February 2017)

How do you defeat Nazis and liars? Focus on the people in earshot, says eminent Holocaust scholar Deborah Lipstadt

Laurel and Hardy sawing a plank of wood

Working with other academics can be tricky so follow some key rules, say Kevin O'Gorman and Robert MacIntosh

Improvement, performance, rankings, success

Phil Baty sets out why the World University Rankings are here to stay – and why that's a good thing

Warwick vice-chancellor Stuart Croft on why his university reluctantly joined the ‘flawed’ teaching excellence framework