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Update on second report

The JEP was originally aiming to provide its second report in September 2019. However the Panel is still working and considering evidence and is not yet in a position to report. With the agreement of UCU and UUK the report will therefore be published later this year.

The Panel hopes that its recommendations, once published, will have a positive influence on all stakeholders and we will communicate further once we are ready to issue our report.

An update from the chair

The Panel would like to reiterate its latest call for evidence and reassure all stakeholders that the Panel is on track to publish its second report in September 2019.

The Panel thanks all those who have contributed so far and calls for evidence to aid the second part of this phase of its work.

This call for evidence focuses on:

  1. potential principles that could underpin future valuations and support the scheme’s sustainability;
  2. alternative paths to the valuation; and
  3. questions of how risk is shared in the scheme, including approaches to contributions and mutuality.

You can find the call for evidence here.

If you still wish to submit evidence in response to the Panel’s first call for evidence, which looked at the valuation process and governance arrangements, please feel free to do so. Please ensure that submissions reach us by the deadline below.

Please submit your comments to: submit@ussjep.org.uk by June 14 2019.

Joanne Segars OBE

Further phase two meetings of the Joint Expert Panel

29 April and 2 May 2019

The Joint Expert Panel held its sixth and seventh meetings of their Phase 2 work. The Panel considered feedback on a series of interviews with a range of stakeholders involved in the valuation and governance process to better inform their findings.

The Panel held an evidence session with the Pensions Regulator to discuss the valuation process and the conclusions of the first report of the Panel. The discussion considered the current regulatory framework within which the valuations take place.

The Panel held a further evidence session with representatives of the Chairs of University Council (CUC) on issues relating to the valuation process. This session was helpful in aiding the panel’s understanding of the valuation process from the institutions’ perspective.

Over the course of both meetings the Panel have considered possible principles that could underpin future valuations and the question of scheme sustainability.

Taking into account their terms of reference and the evidence received to date, the panel discussed the second call for evidence. As always, the panel is keen to hear from a wide range of stakeholders with an interest in the scheme.

Earlier in the year the panel issued a call for evidence which focused on the valuation process and its governance. The panel is grateful for the responses received.

The panel is now issuing a further call for evidence to aid the second part of this phase of its work. This call for evidence focuses on:

  1. potential principles that could underpin future valuations and support the scheme’s sustainability;
  2. alternative paths to the valuation; and
  3. questions of how risk is shared in the scheme, including approaches to contributions and mutuality.

You can find the call for evidence here.

Please submit your comments to: submit@ussjep.org.uk by June 14 2019.

Second call for submissions

The Joint Expert Panel on the Universities Superannuation Scheme (USS) is continuing its second phase of work on the USS valuation.

The first part of our work has focused on the valuation process and its governance. It included a consideration of the roles and involvement of UCU and UUK in the valuation process so that a more collaborative process can be adopted for future valuations; the interaction of bodies with a formal role in the valuation, including the Trustee and JNC; and considering the potential for the involvement of Scheme members in the valuation process and how more effective engagement with employers can be achieved.

The Panel issued a call for evidence on these issues in February and which closed in March. We are very grateful for the responses received which have been considered by the Panel.

The Panel is now focused on the second part of it work. This considers how the long-term sustainability of the Scheme can be secured. It includes:

  1. Developing an approach to future valuations that is clear (and clearly understood by stakeholders) and which can deliver both a sustainable scheme and a shared set of principles.
  2. An exploration of different paths to the valuation of technical provisions and other aspects of the valuation methodology, including Test 1.
  3. Considering questions of risk sharing, including adopting a different approach to contributions (which could, in turn address issues of intergenerational fairness and equality); examining further the question of mutuality and the question of employer appetite for risk; and the potential for risk sharing.

We are particularly interested in hearing views and evidence on principles that could be adopted by the stakeholders and that could underpin an approach to future valuations; issues relating to supporting the long-term sustainability of the scheme; and approaches to the valuation methodology. You should feel free to respond to all three parts of the call for evidence or any one part

Submissions on the above matters or comments for the attention of the Panel are warmly welcomed and should be sent by 14 June 2019 to submit@ussjep.org.uk

We look forward to hearing from you.

Second and third phase two meetings

The Joint Expert Panel held its second and third meetings of phase two of their work recently. The panel considered updates on the 2018 valuation from stakeholders UCU and UUK.

The first part of phase two is focussing on governance issues relating to the valuation process. The chair has conducted a number of structured interviews with a range of stakeholders to inform the panel’s discussions.

An evidence session was held with Professor Gordon L. Clark. Professor Clark has been an elected member of the Oxford University’s Socially Responsible Investment Committee, is an employer-nominated trustee of the Oxford Staff Pension Scheme, is a Founding Governor of the UK Pension Policy Institute, and advised The Kay Review on Equity Markets and Long-Term Decision Making. He is currently advising the Australian Fraser Review of pension fund governance.

A further evidence session was held with Rory Murphy Chair of MNOPF Trustees Limited and Andrew Waring CEO of MNOPF Trustees Limited and Ensign. MNOPF is the multi-employer defined benefit pension scheme set up for officers of the British Merchant Navy, now closed to new members and future accrual but with joint employer and union governance arrangements. A range of issues were covered including the importance of stakeholder confidence in the process, ongoing valuation checks and the relationship with The Pensions Regulator.

The panel were also informed by a considered range of submissions from across the sector and outwith on this question. The panel thanks all those who took the time to submit and will be informed by the detail provided by written submissions and the evidence sessions in reaching their conclusions. Members, employers and interested third parties have all contributed and the panel places on record their thanks for the richness in submissions.

Further interviews will be held with USS as the panel move into planning the next phase of their work looking at how the long-term sustainability of the scheme can be secured within the terms of reference agreed for the Joint Expert Panel.

JEP action points

The Joint Expert Panel (JEP) held its first meeting on 4th February to discuss phase two of its work.

This will be divided into two interlinking parts, the first of which will look at the valuation process and governance. The second part of the Panel’s work which, will start later in the year, will consider how the long-term sustainability of the Scheme might be secured through the development of a shared set of principles and will revisit the valuation of technical provisions and other aspects of the valuation methodology, including Test 1.

UCU nominated Bryn Davies joined the Panel to replace Catherine Donnelly for this phase who has stood down for personal reasons. The Panel expressed their thanks for all her work in phase one.

The Panel heard from John Chilman, Chair, Railways Pension Trustee Company Limited, to explore issues relating to the valuation process, governance and interaction with external actors in a large scale, multi-employer, open defined benefit pension scheme.

Further evidence heard from professional advisors

The Panel reviewed a number of recent submissions from stakeholders including employers, trade unions and individual members. These continue be helpful to the Panel, and we are grateful to all those who have taken the time to submit views and evidence. 

The Panel took evidence from PwC on their professional advice given to USS on the unique covenant of the UK higher education sector, and the diversity of the sponsoring employers of USS. In its discussion with PwC the Panel also considered the unique features of USS. 

The Panel also met with the actuarial advisors to UCU and UUK, First Actuarial and AON, to follow up an earlier session exploring the stakeholders’ assessment of the valuation process in greater detail.

In line with the Terms of Reference set by UCU and UUK, the Panel will publish its report in September. During meeting 8 the Panel went on to discuss its key messages and plans for publication. 

The deadline for submission of evidence is August 17 and you can make your contribution via submit@ussjep.org.ukAll submissions will be treated in complete confidence.

Joanne Segars, Chair, JEP
14 August 2018

Report of latest meeting and evidence session

The Panel heard from Ali Tayyebi (Scheme Actuary, Mercer) along with Jeff Rowney, Head of Funding Strategy, and Guy Coughlan, Chief Risk Officer of USS. This evidence session covered a range of topics including a closer look at Test 1, self-sufficiency, appetite for risk, calculation of discount rate and related issues.

In the discussion that followed, the JEP reflected on the initial presentations from USS having been informed by the evidence from other experts and submissions from stakeholders.  USS are committed to sharing a range of data relating to the valuation requested by the Panel.

Finally the Panel reviewed further work from the actuarial advisors of UUK (AON) and UCU (First Actuarial).

The Panel is continuing to receive submissions from stakeholders on a range of topics. A number of issues are more pertinent to phase two of the JEP’s Terms of Reference and the Panel will return to these submissions at a later point.  At the next meeting, the Panel will look at further evidence on scheme covenant and would welcome comments on this area.

Submissions should be sent to submit@ussjep.org.uk. All submissions will be treated in strictest confidence. In order to ensure that submissions can be fully considered by the Panel it would be very helpful if submissions could reach the Panel by 17 August at the latest.

Joanne Segars, Chair, JEP
31 July 2018

Panel hears from USS trustee chair

The Panel heard from Sir David Eastwood, the Chair of the USS Trustee Board.

He gave the Panel an overview of the valuation process from the perspective of the Trustee including: the sovereign role of the JNC in terms of determining benefits; the principles upon which the Trustee operates; the impact of missing the statutory timetable set by the Pensions Regulator for completing the valuation; the calculation of technical provisions; the imposition of cost sharing; and the Board’s view of its relationship with the JEP.

In the discussion that followed, the JEP considered issues around: the parallel processes of its own report and the decision of the Trustee to invoke cost sharing; the relationship between the Trustee and the Executive; the nature of the tests used by USS and possible alternatives; the performance of the various functions of the USS governance arrangements; the role of the TPR in this valuation process; the quality of information available to members and the Trustee’s communication strategy; and the extent to which the Trustee was engaged in an on-going update of the valuation.

The Panel also separately considered evidence from Professors Miles and Gandy of Imperial College who presented contrasting views of the valuation and the security of benefits. Despite their differing views, the Panel found both presentations helpful and thanked both Professors for their evidence.

Finally the Panel took evidence from EY Parthenon who had performed a review of the HE sector on behalf of USS in advance of the 2017 valuation, as part of its assessment on the strength of the sponsor covenant. This had considered the future growth of the sector and factors that could constrain that growth. This work had contributed to USS’s assessment that the sponsor covenant strength was strong.

The Panel continued to derive considerable insights from the submissions sent to it and remain keen to hear from stakeholders on issues relating to the valuation, including the tests which underpin it, the assumptions and process. Submissions should be sent to submit@ussjep.org.uk. All submissions will be treated in strictest confidence. In order to ensure that submissions can be fully considered by the Panel it would be very helpful if submissions could reach the Panel by 17 August at the latest.

Joanne Segars, Chair, JEP
17 July 2018

Chair’s report: 28 June 2018

The Panel reflected upon a range of issues relating to the verbal and written evidence they had received so far, including submissions from stakeholders.

Taking account of the Panel’s Terms of Reference which require the JEP to take account of a range of factors, the Panel discussed the valuation with reference to the unique character of the HE sector, assessments of equality and intergenerational fairness, the need to strike a balance between stability and risk, and the current legal framework, including the role of TPR.

The Panel also discussed and reflected on the evidence it had heard regarding the valuation methodology which underpinned the USS valuation including questions around the role of the three tests, de-risking, the time horizon of the covenant, the fund’s approach to integrated risk management, and comparisons between USS and other large-scale schemes.

The next series of meetings will see the Panel hearing from the Trustee and its advisers. The Panel will also consider evidence provided to it through its call for submissions. The Panel noted that its understanding of the key issues had been significantly enhanced by submissions made by stakeholders.

The Panel remains keen to hear from stakeholders on issues relating to the valuation, including the tests which underpin it, the assumptions and process. Submissions should be sent to submit@ussjep.org.uk. All submissions will be treated in strictest confidence.

Joanne Segars
Chair, JEP