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Statement of the thirteenth meeting of the tripartite group

The Tripartite Group continued to focus on the JNC and steps that could be taken to improve the effectiveness of the JNC.

The Tripartite Group (TG) considered a note from the JNC Effectiveness Group (JNCEG) which set out in further detail the JNCEG’s approach to taking forward measures to improve the operation of the JNC. The JNCEG had agreed to split its work into two phases:

  • Phase 1: Improvements that could be made in the short term. These could include changes to meeting formalities, a focus on training and induction for new JNC members, more effective use of time and work planning , and a commitment from all parties to improved timeliness of communications etc. It was intended to present a firmer set of ‘quick wins’ to the TP after the summer.
  • Phase 2; A ‘deeper dive’ into the issues that were preventing the JNC from being as effective as the parties wished it to be. This would be a longer piece of work which would likely take a number of months to complete. The JNCEG had also agreed that it could be beneficial to consider decision-making processes in other, large, schemes.
The TG considered this a sensible approach and agreed that the issues to be covered in the deep dive, including consideration of roles and responsibilities, would need a longer discussion. It would be important that that phase of work was clearly defined and the JNCEG was asked to draft a potential Terms of Reference for the TG to review in the context of its initial “asks”.

It was agreed that at a future meeting further discussions would take place to agree arrangements for the Strategic Discussion Forum. It was also agreed to return to the issues of trust and confidence as well as meeting the needs of members.

Statement of the twelfth meeting of the tripartite group

The Tripartite Group continued to focus on the JNC and steps that could be taken to improve the effectiveness of the JNC. This followed earlier discussions which had identified a) some of the factors that were inhibiting the JNC from operating as effectively as it might and b) some of the features of a high-performing, effective JNC. This process had identified some common ground in terms of inhibitors as well as features of effectiveness.

The Tripartite Group considered an update from the JNC Effectiveness Group (JNCEG) which had been commissioned to consider issues around the effectiveness of the JNC. The JNCEG had received two “asks” from the Tripartite Group:

  1. An options paper which considered issues relating to the operation and effectiveness of the JNC, including their pros and cons
  2. To undertake an in-depth analysis to diagnose the JNC’s effectiveness (or otherwise), ie why the JNC is not operating effectively.

The JNCEG discussions had allowed time to consider a series of actions and behaviours which could be adopted by the JNC, stakeholder groups and USS which could contribute to the JNC’s long-term success and the continued building of trust. In particular, these focused on role and remit, trust, use of time and planning and effective meeting operation. The Tripartite Group agreed that the JNCEG’s work was progressing well and that it was clear that some good and honest discussions were taking place.

Based on the output from the JNCEG the Tripartite Group agreed it would be helpful if the JNCEG could consider roles and responsibilities of the JNC and any ways in which this might be different from the current position; views on the time commitment needed by JNC members, noting that there are now more demands on JNC members’ time; solutions as well as the analysis of what does not work well. It was noted that resolving these issues is critical and as such could not, and should not, be rushed.

The Tripartitie Group also considered future work programme. These included defining in further detail the role and scope of the Strategic Discussion Forum and work to help promote greater trust and confidence between the parties. It was noted that these items might require bi-lateral discussions between UCU and UUK initially.

Statement of the eleventh meeting of the tripartite group

Summary Note – Meeting 11

 

The Tripartite Group continued its discussion around improving the effectiveness of the Joint Negotiating Committee (JNC).

 

The Group considered what each party felt ”good” would look like in relation to an effective and high-performing JNC. Views common to all three parties included operating with mutual trust, respect and openness and a clear recognition of roles and responsibilities.

 

The Group went on to consider the factors that currently hinder the effectiveness of the JNC, i.e. prevent it from operating with the features identified as characterising high performing. Issues identified included:

 

  • Issues are not dealt with in a timely fashion and/ or real engagement comes too late in the process;
  • Discussions are often adversarial and rarely collaborative
  • Parties do not always have the information they need
  • Roles and responsibilities may not well understood or can be conflated with other responsibilities.

 

It was agreed to provide these thoughts to the JNCEG to support their additional work diagnosing the factors that hinder the effectiveness (or otherwise) of the JNC. It was noted that the JNCEG would provide a report to the Tripartite Group shortly.

 

The Tripartite Group also received a presentation from UUK which summarized the final report from UUK on its consultation with USS employers on the recommendations of the JEP’s second report. This showed strong support for the JEP’s recommendations. Employers welcomed the proposal for a joint purpose statement, shared valuation principles and sustainability statement. There was also support for the JEP’s proposals around developing alternative paths to the valuation and using a dual discount rate methodology. Employers had also expressed a desire for a focus on value for money and a clear articulation of the trade-offs of risk and reward and how this would contribute to sustainability. There was support for the establishment of a valuation methodology discussion forum (which had already been set up by USS). There was also support for more flexibility for members to address the high level of opt outs from the Scheme. Mutuality was largely seen as being a positive feature of the Scheme.

 

It was agreed that the Tripartite Group would consider its future work programme at its next meeting in June.

Statement of the tenth meeting of the tripartite group

SUMMARY NOTE – MEETING 10

The Tripartite Group received a brief update on the valuation discussion document which had been issued by the Trustee.

The Tripartite Group considered the JNC Effectiveness Group’s (JNCEG) report. This report set out a number of options to improve the effectiveness of the JNC, including the pros and cons of those options. The starting point for this piece of work had been the JEP’s second report, but the JNCEG’s work was not constrained by the JEP’s report. The report set out options covering a wide range of issues relating to the current operation of the JNC and how that might be enhanced.

Following on from its consideration of the JNCEG’s report, the Tripartite Group held a discussion on the JNC’s effectiveness as a result of which a second piece of work was commissioned from the JNCEG.

This second piece of work asked the JNCEG to undertake a more in-depth piece of analysis to
diagnose the JNC’s effectiveness (or otherwise) and to consider the factors that have hindered its effectiveness. In other words, it asks the JNCEG to consider why the JNC is not operating effectively asight be desired. It was proposed that this assessment should take place against the three core functions of the JNC: acting as a check and balance to the Trustee in certain areas; rule changes; and deciding on contribution increases or decreases and/or benefit changes where the cost-sharing provisions are invoked following a valuation. The JNCEG was also asked to consider what “good” might look like in terms of a high-functioning JNC. This exercise would also be undertaken by the stakeholders and the Trustee for discussion at a future meeting.

Finally, it was agreed to seek dates for future meetings in June.

Statement of the ninth meeting of the tripartite group

In light of the government guidelines, the meeting took place via Video Conference.
The Tripartite Group received an update from USS regarding the work of the Valuation Methodology Discussion Forum which had continued to meet.

The Tripartite Group went on to consider the draft report from the JNC Effectiveness Group (JNCEG). This Group had been commissioned by the Tripartite Group to consider and set out options for how the JNC could be made to work more effectively. The JNCEG had been asked to take the JEP’s recommendations as its starting point, but not to be limited by these recommendations. The JNCEG had set out, as its emerging views, a set of options covering a range of issues relating to the operation of the JNC. These included: greater visibility of the USS Board of Directors; the Trustee’s Committee structure and valuation matters; a joint forum on valuation matters; improving the effectiveness of the JNC (which had a number of dimensions); a high-level steering committee on strategic issues; employer representation in USS; and member representation in USS.

The Tripartite Group held high level discussions on the JNCEG’s draft report. It was noted that a number of changes had already been implemented, such as Trustee Director attendance at JNC meetings and the creation of the VMDF. These had helped build understanding of the issues and had helped to build trust and confidence. Discussion took place around how these developments could be further enhanced. The Tripartite Group welcomed the JNCEG’s work and requested further work to be undertaken.

Statement of the eighth meeting of the tripartite group

In light of the emerging issues relating to COVID-19 it was agreed to shorten the meeting to enable stakeholders and the Trustee to respond to current issues.

The Tri-Partite Group agreed the final wording of the joint definition of sustainability. This is attached with this meeting summary, along with the Scheme Purpose Statements from the Stakeholders and the Trustee and the Shared Valuation Principles.

The Tri-Partite Group discussed the work of the Trustee’s Valuation Methodology Discussion Forum (VMDF), which had continued to meet, and the USS Discussion Document which had been published since the Tri-Partite Group had last met.

Stakeholders noted the publication of the Discussion Document by USS. A discussion took place on ensuring that the Discussion Document was as clear as possible. This would in turn ensure that Stakeholders (in particular, participating employers) could respond in as full a manner as possible to aid the Trustee’s deliberations. It was agreed to sat up a call with the Stakeholders’ actuarial advisers (AON and First Actuarial) and USS to discuss and clarify a number of technical issues relating to the Discussion Document.

The Tripartite Group learned that the JNC Effectiveness Group was making good progress and would be ready to present its initial views shortly.

The Tri-Partite Group received a report from UUK summarising the outcome of their consultation with members on the JEP report and matters relating to the 2020 valuation. Overall, the consultation had revealed strong support for the JEP’s recommendations. Areas of support included having a shared common Scheme purpose, the shared valuation principles and a dual discount approach to the valuation methodology. There was a strong support for the JEP’s recommendations around meeting the needs of members and a desire to explore options around contributions flexibility to address the high level of Scheme opt outs. There was a common view that issues needed to be dealt with in parallel to the current valuation cycle.
It was agreed that the next meeting would take place on 24 March. The final format of the meeting and content would remain under review in light of the current situation.

Statements of the sixth and seventh meetings of the tripartite group

Meeting 6

 

The Group received an update of the first meeting of the Valuation Methodology Discussion Forum (VMDF) which the Trustee had established to support and inform the development of the 2020 valuation. The VMDF comprised representatives from the two stakeholders and their advisers as well as representatives from USS, including Trustee Directors. The VMDF  had covered a lot of ground in its first meeting, including discussions on prudence and risk appetite. The Forum’s work would help inform the Trustee’s discussion document on the valuation which would be published in March. Both stakeholders and the Trustee agreed that the VMDF was a valuable forum. UCU and UUK said they thought the VMDF was looking more broadly and deeply at issues than was the case with previous groups and this was considered beneficial.

The Group discussed the JNC effectiveness workstream which it had commissioned. This workstream comprised representatives of the stakeholders and USS. It would hold a ‘kick off’ meeting on 18 February and would continue to meet with a view to providing an options paper for the Tri-partite Group in March, providing a short update in late February. The Tripartite Group expressed its thanks to all those who had volunteered their time to this workstream.

The Tri-partite Group continued its discussion on sustainability. It was agreed that sustainability was important for ensuring confidence in the Scheme. The Group agreed that sustainability in the context of a scheme like USS had many dimensions. But the group considered the dimensions to be most relevant for USS as: affordability, stability, clarity, adaptability, relevance and viability.

The Group started a discussion on rebuilding trust and confidence and the governance of the Scheme. Each party had set out areas which worked well, areas which worked less well and damaged trust and confidence and measures that could help restore trust and confidence. The Group agreed it would be helpful to continue this discussion at its next meeting.

Future meetings would receive feedback on the results of the employer consultation on the JEP report and the current issues under consideration. In addition, the Group would receive reports of the JNC effectiveness workstream and updates on the VMDF.

 

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Meeting 7

 

The Tri-Partite Group discussed the work of the Valuation Methodology Discussion Forum (VMDF) which had held three meetings. It was noted that the Trustee planned to issue a discussion document on the valuation methodology shortly. Stakeholders emphasized the need for the discussion document and the valuation process to be, and be seen, as collaborative – noting that it is the Trustee’s legal responsibility to set the assumptions. The importance of this document was recognized by all members of the Tri-partite Group.

The Group noted that the JNC effectiveness workstream had held a ‘kick-off’ meeting. This had been a positive meeting. Further meetings were being arranged in order that the workstream could produce an options paper for the Tri-Partite Group.

The Group continued its discussions on a agreeing a common definition of sustainability. It was agreed this should include a clear commitment to the fact that the Stakeholders and the Trustee wanted a sustainable scheme and to define what that means. The Tri-partite Group continued to refine the definition. It was agreed this should include the following features: affordability, stability, clarity, adaptability, relevance, and viability. It was agreed to review the statement further in order to clarify the positions of the Trustee and Stakeholders in the Scheme’s governance arrangements.

It was agreed to return to the question of trust, confidence and governance at a future meeting.

It was agreed that a report on the outcome of the UUK consultation exercise would be given at the next meeting.

Call for submissions – Joint Expert Panel

The JEP has recently started its second phase of work on the USS valuation. The second phase has two parts, the first of which is concerned with 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 can 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.

We would ask stakeholders to hold back any comments on this wider matter until later in the year.

The first part of the JEP’s work includes consideration of:

• The roles and involvement of UCU and UUK in the valuation process so that a more collaborative approach could be adopted.
• An examination of the interaction of the various bodies with a formal role in the valuation process, including the trustee and the JNC.
• The potential for the involvement of Scheme members in the valuation process and how more effective engagement with employers can be achieved.

The Panel is seeking submissions from stakeholders and others on the above subjects and is particularly interested in views on improvements that could be made to:

• The valuation process, and decision-making (rather than, at this stage of its deliberations, the methodology) and in particular the content and timing of different aspects of the process and engagement between the scheme and the various stakeholders; and
• The governance of the valuation process and in particular the role of different parties including UUK, UCU, the JNC, the trustees and others in providing that governance.

Submissions on the above matters or comments for the attention of the Panel are warmly welcomed and should be sent by 15th March 2019 to submit@ussjep.org.uk.

The Panel will issue a further call for evidence in respect of part two of its enquiry in due course.

Report of the Joint Expert Panel

The first report of the Joint Expert Panel (JEP) is published today (13 September). The Panel was set up by the University and College Union (UCU) and Universities UK (UUK) following the recent industrial dispute over the Universities Superannuation Scheme (USS). The Panel comprises senior figures from the pensions sector as well as academic experts from within higher education and is chaired by Joanne Segars OBE.

The first report has undertaken a retrospective review of the 2017 valuation, including an assessment of the methodology, assumptions and process underpinning the valuation. Arising from this, the Panel has explored the scope for possible adjustments to the methodology which would allow the valuation to be concluded.

In launching the report Joanne Segars said:

“In reaching our unanimous conclusions and recommendations the JEP has, of course, had the benefit of hindsight – a luxury not available to the Trustee as it worked to a tight timetable to complete the valuation. Neither has it been the approach of the Panel to be critical of any party that has been involved in the valuation. Our observations, conclusions and recommendations are intended to be constructive and should be read in that spirit.”

The Panel unanimously recommends four areas where adjustments to the valuation should be considered:

  1. A re-evaluation of the employers’ attitude to risk, which would result in a re-evaluation of the reliance on the sponsor covenant.
  2. Adopting a greater consistency of approach between the 2014 and 2017 valuations, which affects the scale and timing of deficit recovery contributions.
  3. Ensuring fairness and equality between generations of scheme members by smoothing future service contributions.
  4. Ensuring the valuation uses the most recently available information which means taking account of recent market improvements, new investment considerations and the latest data on mortality, for example.

In addition, greater weight should be given to the unique features and strengths of the higher education sector. The Panel believes the combined effect of these changes would satisfy the employers’ overall appetite for risk as well as members’ desire to maintain broadly comparable benefits and would provide a constructive negotiating space for the stakeholders to reach a consensus on the way forward. It is the view of the Panel that the changes proposed are consistent with the Trustee’s fiduciary duties and the objectives of the Pensions Regulator and provide an opportunity for stakeholders to resolve the dispute.

Adjustments in each of these areas would have a material impact on the valuation and resulting contribution increases. The level of benefits is a matter for the stakeholders to negotiate. However, it is the Panel’s belief, based on independent actuarial analysis, that the full implementation of these adjustments could mean total required contributions estimated at 29.2% to fund current benefits (minus the 1% match). This compares to the current rate of 26% (18% of salary paid by employers, 8% by employees) and the rate of 36.6% from April 2020 which is proposed by USS, based on the valuation as it stands.

Commenting on those recommendations which propose adjustments to the valuation Joanne Segars said:

“The Panel does not underestimate the practicalities of concluding an actuarial valuation so long after the process began. However, the Panel believes it would be in the public interest if all stakeholders, including the Regulator, could find a way forward to implementing our recommendations within the 2017 valuation.”

The Panel also looked in detail at the methodology, assumptions and tests employed by the Trustee, and particularly at USS’s ‘Test 1’ which underpins the 2017 valuation. In the Panel’s view this test has assumed too much weight in determining the valuation.

The Panel concluded that this and other issues should be addressed by Phase 2 of its work which should seek to determine whether there is an alternative methodology for future valuations that could both provide long-term stability for the Scheme and enjoy the support of all parties. Phase 2 of the JEP’s work should also include a wider review of the involvement of UUK and UCU in future valuations so that a more collaborative approach can be adopted which would help to restore confidence in the Scheme.

Looking forward Joanne Segars said:

“We believe that our constructive and practical proposals for adjustments to the valuation can be implemented quickly and act as the cornerstone for a negotiated settlement. Ultimately it will be for all the parties to decide whether to respond positively, but we believe that the report provides a genuine opportunity to turn the page, to focus on the long-term stability of the USS and rebuild trust and confidence in the Scheme.

“Our report and its recommendations do not address all the issues faced by the Scheme. We believe further work is required by the JEP. This should include developing an approach to the valuation that is clear and which can deliver a sustainable scheme based on a shared set of principles.

“I would like to thank the many scheme members, employers and experts who have submitted views and evidence to the JEP. I would also like to thank USS for their cooperation and for the considerable resources they have laid at our disposal. While we have been grateful for all the support we have had the conclusions are ours alone.”

Notes:

  1. The Panel’s members are: Joanne Segars OBE (Independent Chair), Ronnie Bowie (appointed by UUK), Sally Bridgeland (appointed by UUK), Chris Curry (appointed by UUK), Catherine Donnelly (appointed by UCU), Saul Jacka (appointed by UCU), Deborah Mabbett (appointed by UCU).
  2. The Panel’s purpose, as set out in its terms of reference, was to make an assessment of the 2017 valuation; focus in particular on reviewing the basis of the scheme valuation, assumptions and associated tests; agree key principles to underpin the future joint approach of UUK and UCU to the valuation of USS. The agreement set out that the Panel would take into account: the unique nature of the higher education sector, intergenerational fairness and equality; the clear wish of staff to have a guaranteed pension comparable with current provision whilst meeting the affordability challenges for all parties; and the current regulatory framework.
  3. The executive summary is attached to this release. The full report is available below.

For media enquiries contact: chair@ussjep.org.uk

Executive summary of the Report of the Joint Expert Panel

Report of the Joint Expert Panel