Dissatisfaction with USS mounts as fund pays top staff more

Pension scheme’s annual report shows relationship with members worsening amid ongoing dispute over contributions

July 29, 2020
Source: iStock

Members’ satisfaction with UK higher education’s largest pension fund has declined, amid the continuing dispute over the scheme’s valuation and increased employee contributions.

In its latest annual report, the Universities Superannuation Scheme states that the percentage of its members reporting a good relationship with USS declined in 2019-20 to 24 per cent, from 31 per cent in 2018-19.

Writing in the report, Bill Galvin, the USS group chief executive, says “we are concerned that despite 88 per cent of members reporting that they are well served by USS, they are less positive about their overall relationship with the scheme…We share members’ frustrations at requirements for increased contributions and understand the impact this has on feelings about the scheme.”

Mr Galvin adds: “We hope that, despite the difficult backdrop, it is clear that we work hard every day to make sure benefits accrued with us are secure, and members are as well served as possible.”

The report comes after USS warned in early July that contributions to the fund may have to rise “sharply” after the impact of the coronavirus on financial markets added billions more to its estimated deficit. To protect existing benefits on the current valuation methodology, they would need to rise to 39.2 per cent, USS said.

Members of the University and College Union at 52 pre-92 institutions went on strike for 22 days over the past academic year over increases in contributions to 30.7 per cent of salary – 9.6 per cent from members and 21.1 per cent from employers. Contributions were previously 8 per cent for employees and 18 per cent for employers.

The annual accounts put the estimated funding deficit at £12.9 billion on 31 March, up from £5.7 billion in 2019 and £3.6 billion two years ago. By the end of June this year, this figure had hit £20.2 billion.

The annual report also reveals that the number of “high earners” at USS increased in the last year: in 2019, 131 individuals earned more than £100,000, while in 2020, 144 topped that figure.

This included three people earning over £1 million in 2020, compared with two in 2019.

The report says that Mr Galvin’s salary increased from £459,163 in 2019 to £486,410 in 2020, and that he received a bonus last year of £212,009 – more than double the 2019 figure of £103,419.

“Salaries reflect the experience, responsibility and contribution of the individual and of their role within USS,” the report says.

Mr Galvin said that the 2020 report outlined the position of the scheme against the “challenging backdrop” of coronavirus and its impact on the financial markets.

“Five-year investment performance was strong in absolute and relative terms, and we retained our cost advantage versus peers. Even before Covid-19, historically low interest rates, increased life expectancy, greater regulation, and volatile financial markets had already made promises of a set retirement income for life more expensive,” he said.

“The depth of the economic shock brought about by the pandemic has highlighted the long-term challenges facing open [defined benefit] pension schemes such as the USS; challenges that we intend to work with our stakeholders – Universities UK and University and College Union – to address through the ongoing 2020 valuation.”

anna.mckie@timeshighereducation.com

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Reader's comments (5)

In most organisations, presiding over a huge loss would result in the sack! At USS, the situation has become so normal that the boss gets a bonus despite the abysmal performance of the scheme. I wish I had a reward mechanism that was so generous. However, regular academics there are no bonuses and probably no pay rises for a while either.
“We share members’ frustrations at requirements for increased contributions and understand the impact this has on feelings about the scheme.” That doesn’t help. But the scheme’s leadership - and Bill Galvin in particular - need to understand too that the relationship is poor for more fundamental reasons to do with the behaviour of that same leadership over a lengthy period. Members simply don’t trust what they say or that decisions are being made in the interests of those the scheme is meant to serve. As the previous commenter points out, a doubling of the bonus paid to Mr Galvin at a time when he claims the deficit has grown further is also very poorly judged and further damages the relationship.
I started as a lecturer in 2016 and opted out of the USS then because I was concerned about its management and its treatment of members. Nothing in the intervening four years has allayed those concerns. I will continue to lose the employer contributions, so the Scheme has failed me significantly ... but in an invisible way. There are likely to be more young academics in my position going forward as contributions continue to rise, as benefits continue to be undermined and as trust continues to disintegrate. The USS administrators can continue to push for the deterioration of the Scheme; but they may soon find themselves with no new members to administer.
I have come to the USS late in my career and, fortunately, have acquired multiple final salary pensions along the way. With retirement a little over 4 years away I am adding a significant amount monthly (for me anyway and also as a Professional Support, non-academic member of the USS) into the Investment Builder element. My selection in this fund is performing outstandingly well with significant annual growth in the high teen percentage region. I find myself in a real dilemma though as the accrued benefits from the main scheme are deteriorating in real terms whilst costs increase. I can't withdraw from the main scheme and retain my investment in the additional scheme which is a tracker. Long preamble but the point is this - the tracker shows that some people are capable of making sound investment decisions whilst the main USS clearly are not. Time for a change methinks!
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