The deficit of the pension scheme funding the retirements of UK university staff has more than doubled in three years, and now a prominent MP is asking why.
The Universities Superannuation Scheme (USS) provides pensions for academics and has 390,000 members across 350 universities in the UK.
The annual accounts of the USS, showed the pension fund’s deficit had widened from £5.3bn in 2014, to £12.6bn this year. This is the largest recorded deficit of any UK retirement fund.
Now Frank Field, who chairs parliament’s Work and Pensions Committee has written to ministers, the pension regulator and the trustees of the scheme in an effort to understand why the scheme deficit has increased so much, according to FTAdviser’s sister paper, the Financial Times.
Mr Field said that increasing tuition fees to pay for the sort of defined benefit pension entitlements student’s themselves will likely never enjoy strikes him as unfair.
He described the letter he has written as the “opening skirmish” in what he thinks will be an ongoing interest in the USS from politicians.
The Financial Times reported that in letters to the regulator and David Eastwood, vice-chancellor of the University of Birmingham and chair of the USS board of trustees, this month, Mr Field said the “large and growing funding gap” in the USS scheme was giving rise to “serious concerns” about how the fund would address the deficit and what implications it might have for universities.
Mr Field also questioned the regulator over decisions in 2011 and 2014 that allowed the USS to stretch its deficit repayment plan to 10 and 17 years, respectively.
He asked the regulator what involvement Bill Galvin, group chief executive of the USS, has had in discussions between the USS and the regulator. Mr Galvin was chief executive of the Pensions Regulator for three years, until 2013.
The Pensions regulator responded to Mr Field’s letter by saying it is “closely engaged” in discussions with the USS on the matter.
Universities UK, the representative body for universities, said it would send a “full response” to a letter Mr Field had sent to its president, Janet Beer, who is vice-chancellor of the University of Liverpool.
The USS said the deficit is the consequence of persistently low interest rates in the UK.
Low interest rates impact on the deficits of pension schemes because the pension fund typically invests in low-risk assets such as government bonds, the yields on which are compressed when interest rates are low.