Fuel for thought

March 2, 2017

With the triennial valuation of the Universities Superannuation Scheme due in March, we are concerned about the self-inflicted harm caused by a flawed measure introduced by the trustee to manage risk.

This measure, “Test 1”, requires closure of the scheme to be within reach at all times. While this may sound innocuous, it forces investments away from the healthy asset mix that has served the scheme well and towards unproductive, low-return assets such as government bonds. This makes paying benefits much more expensive, leading to higher contributions and putting the scheme’s longevity at risk.

The logic behind Test 1 is best illustrated with an analogy. You need to run a motor boat across a bay with a jagged shoreline. You cannot abide the possibility of being stranded in the bay if you run out of fuel. Thus, you decide to hug the coast so that you can bail out in extremis. This decision is made without checking whether the fuel is sufficient for the direct route, or if a manageable top-up would allow ample levels for safe passage. Of course, the fuel required for your new, winding route is much greater. Your decision to hug the coast greatly increases any fuel deficit, increasing the probability that you will be unable to complete the trip.

The chief risk officer for the USS describes Test 1 as ensuring that a safe harbour is always in reach. To us, it looks much more like steering the fund towards an unnecessary beaching.

Sam Marsh, university teacher, School of Mathematics and Statistics
Matthew Malek, lecturer in experimental particle physics
University of Sheffield

Send to

Letters should be sent to: THE.Letters@tesglobal.com
Letters for publication in Times Higher Education should arrive by 9am Monday.
View terms and conditions.

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 3 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

Have your say

Log in or register to post comments

Most Commented

Lady Margaret Hall, Oxford will host a homeopathy conference next month

Charity says Lady Margaret Hall, Oxford is ‘naive’ to hire out its premises for event

women leapfrog. Vintage

Robert MacIntosh and Kevin O’Gorman offer advice on climbing the career ladder

Woman pulling blind down over an eye
Liz Morrish reflects on why she chose to tackle the failings of the neoliberal academy from the outside
White cliffs of Dover

From Australia to Singapore, David Matthews and John Elmes weigh the pros and cons of likely destinations

Michael Parkin illustration (9 March 2017)

Cramming study into the shortest possible time will impoverish the student experience and drive an even greater wedge between research-enabled permanent staff and the growing underclass of flexible teaching staff, says Tom Cutterham