Pension speculation

April 28, 2000

Andrew Oswald invites us to believe that the Universities Superannuation Scheme could raise academic pensions from 50 per cent to 66.6 per cent of final salary if only the trustees ignore actuarial advice and chose to do so ("Richer than you thought", THES, April 14).

This increase of 16.6 percentage points would involve increasing payments by 33.3 per cent. Oswald estimates the Pounds 20 million fund is Pounds 2 million or 10 per cent "in surplus", yet the stock market can fluctuate by about 5 per cent in the course of minutes. How can a 33.3 per cent hike be funded out of a 10 per cent surplus?

Unlike every other part of higher education, the USS happens to be adequately funded. But that does not mean that it is cumulatively overfunded in the context of the significant annual increases in numbers of participants.

It is right that individual USS contributors and beneficiaries should take an informed and sensible interest in the conduct of the fund, but if they should be pressing the trustees to do anything this should be: to continue to defend the present adequate financial position; to provide prompt and efficient attention to servicing individuals (as distinct from the member institutions); and to work systematically to extend the range of choices, improve benefits around the edges within the limitations prescribed by Inland Revenue approval, and avoid a situation where contributions might have to be raised back to their previous level.

While the "defined contributions" system for pensions favoured by Oswald is a recognisable alternative for those of a speculative frame of mind, the "defined benefits" system in use has advantages for the many who value the non-speculative security their pensions - in my case, my spouse's - provide.

Humphry Crum Ewing Lancaster University

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