USS finances on a ‘more stable footing’, says chair

Annual reports for the multi-billion-pound university pension scheme show that asset values grew this year, but member satisfaction plummeted

The Universities Superannuation Scheme finances are on a “more stable footing” than this time last year as a result of “difficult decisions” to cut benefits and increase contributions, the Trustee board chair has said.

Dame Kate Barker, chair of the USS board, said the pension scheme “could be on track to achieving a more robust funding position”, a possible precursor to “more positive discussions in future”.

Dame Kate was addressing figures released as the USS published its 2021/22 reports and accounts, which show that total assets under management increased to £90.8bn, up from £82.2bn the year previous.

The report comes as the USS Trustee implemented the divisive outcome to the 2020 valuation, which sparked strikes across the sector.

The mood among employees whose pensions USS manages has soured further: only 17% of members view the pension scheme positively, while 30% are neutral and 42% are negative. Conversely, 92% of employers reported a good or very good relationship.

The scheme’s accounts show that the defined benefit (DB) fund stood at £88.9bn, up from £80.6bn, while its defined contribution (DC) assets totalled £1.9bn, up from £1.6bn. The DB funding deficit now stands at £1.5bn, down from £14.1bn at the 2020 valuation. There was a 9.55% return on assets, 2% above the benchmark. Bill Galvin, USS Group chief executive, said: “The scheme is in a significantly better position in many different ways at the end of 2021/2022. While market conditions have been volatile, strong investment returns outpaced the growth in liabilities and the funding position has improved.”

USS membership grew by almost 25,000 to 500,584, of which 212,306 are active, 207,201 deferred and 81,077 retired.

For the first time in some years, recent data indicate we could be on track to achieving a more robust funding position and our hope is that conditions improve over time, sufficient to allow more positive discussions in future
– Dame Kate Barker, USS board chair

The report also sets out other major changes announced by USS this year, primarily its ambition, announced in May 2021, to be “net zero for carbon by 2050, if not before”. It will do this with divestment and investments, including a £500m sustainable growth fund invested “in high growth, privately owned businesses that are developing technologies and services that will help companies and the broader economy to decarbonise”. Already, it has announced a “climate tilt” to a £5.6bn portion of its equity investments. In February, USS set targets to cut the emissions generated by companies in its investment portfolio by 25% by 2025 and 50% by 2030 (relative to a 2019 baseline).

On the publication of the annual accounts and report, Dame Kate said: “Over the past year, we have wrestled with significant issues and difficult decisions, but the benefit changes introduced this year – as unwelcome as they were – have put the scheme on an affordable and more stable footing. For the first time in some years, recent data indicate we could be on track to achieving a more robust funding position and our hope is that conditions improve over time, sufficient to allow more positive discussions in future.”

She added that USS, with Universities UK and the University and College Union (UCU), was working on “exploring lower cost options, considering different benefit structures (such as conditional indexation), and reviewing the scheme’s governance arrangements”.

Commenting on the drop in satisfaction levels, Galvin said: “We completely understand these sentiments and are committed to working together with our stakeholders to deliver the best possible outcomes as we look forward to planning the scheme’s future against a less difficult backdrop than in the recent past.”

UCU, meanwhile, greeted the news with an attack on Galvin’s annual bonus. Said general secretary Jo Grady: “Whilst staff try to figure out how to manage the impact of USS pension cuts worth hundreds of thousands of pounds, Bill Galvin is wondering how best to spend his £100k bonus and his £480k salary. It is a disgraceful show of excess that will rightly be condemned by university staff up and down the UK.

“From leading a disastrous valuation process to overseeing unprecedented attacks on retirement incomes, Galvin’s record is one of overpaid failure. Staff have had enough, and that’s why they are balloting again to win their pensions back.”

Read more: UUK announces consultation on USS governance reform

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