The pension millionaire game

April 28, 2000

Pension chiefs should learn tobe more open and ask the audience, says Andrew Oswald

Chris Tarrant: Welcome to the only show where you, the regular person, can win riches. I believe you are Ulysses. Are you ready to play? Good. Here is your first question. What are the Universities Superannuation Scheme's total assets as of mid-April 2000? Are they: Pounds 16 billion, Pounds 18 billion, Pounds 20 billion, at least Pounds 22 billion?

Ulysses: Well, I believe it is the last, at least Pounds 22 billion, Chris.

Chris Tarrant: Well done. OK. Questions get trickier from now on. Is it true that on standard projections the USS pension scheme currently has an actuarial surplus? Answers are: No way, No, Yes quite big, Yes enormous.

Ulysses: It is no, Chris.

Chris: No? You still have some lifelines. Are you sure you want to go for "no"?

Ulysses: Well I think it must be no, Chris, otherwise I would have heard about it. But I'll ask the computer to take away two wrong answers.

Chris: The computer leaves you: yes enormous and yes quite big.

Ulysses: That surprises me. I will guess "yes enormous".

Chris: Spot on. Here is your next question. If there are 30,000 pensioners, and the unneeded actuarial surplus is hypothetically Pounds 1.8 billion, how much is that per pensioner? Is it: Pounds 60 or Pounds 600 or Pounds 6,000 or Pounds 60,000?

Ulysses: I'll try Pounds 60,000.

Chris: Yes, difficult to believe isn't it. Now for another. Most USS members' original contracts say that their employer will put in 16 or 18 per cent while actually the employers are putting in which of the following: 14 per cent, 15 per cent, 16 per cent, or 18 per cent?

Ulysses: My hunch is 14.

Chris: That is the right answer. Here is your next question. How reasonable do you think it would be in a pension savings scheme to reduce employers', rather than employees', contributions if an unexpected surplus were encountered?

Your choices are: what does reasonable mean?, I would need my lawyers before answering, only a moral philosophy professor could possibly comment, extremely reasonable?

Ulysses: I think it may be the last one. May I phone a friend?

Chris: Certainly. Who will it be?

Ulysses: My solicitor, George Dosh. (Ring ring) - George advises me to say nothing.

Chris: Correct. Your final question. Has USS ever, in any committee or meeting, mentioned or debated the theoretical possibility of going over to a two-thirds pension rule without mentioning the debate to its members: yes, no, definitely no, absolutely definitely no?

Ulysses: I'll ask the audience.

Chris: Certainly - 90 per cent of the audience think it is absolutely definitely no.

Ulysses: I might as well go with that, Chris - my answer is absolutely definitely no.

Chris: Are you sure?

Ulysses: Definitely, USS has absolutely definitely not debated a two-thirds pension rule.

Chris: You have been a great contestant. That is the wrong answer. I am sorry but you are not going to be a millionaire on the current programme.

The above may be fun, but in my view the USS could reasonably be expected to be frank with us. Is there a surplus on their projections? What are they going to do with such a surplus? Who owns it, legally and ethically?

I accept that these are tricky questions and that sensible people can view the issues differently. I certainly do not claim to have all the information or to know all the answers. But university teachers and USS officers are ultimately on the same side. Perhaps a more open dialogue is the best way forward.

Andrew Oswald, professor of economics, University of Warwick.

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