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Low risk is intolerable when shared by 350 institutions but high risk is fine when borne by workers individually
USS’s current troubles, and UUK’s proposed solution, reflect an incoherent attitude toward risk on the part of our employers.
Their responsibility for the difficulties we now face can be traced to a consultation in February-March 2017 (on which Fits Redline 24 23 Vintage Waist PETITE Levi's qwZZ7txAO). Back then, they re-affirmed a false, overly conservative assumption regarding the growth of the higher education sector. When applied to USS’s much criticized Test 1, this forces a ‘de-risking’ of the scheme towards a bond-weighted ‘self-sufficiency’ portfolio. Employers chose this even though USS suggested that they instead embrace a different, less restrictive assumption, on grounds that it was internally coherent with USS’s own assumptions regarding the growth of the sector. (mens hoodie sweater hoodie jumper sweater cosy sweater clothing mens casual long Minimalist Festival festival minimalist sleeves OZHxpqwXq.)
Had employers accepted USS’s more realistic, less restrictive assumption, this would have reduced the deficit of the September valuation from £5.1 bn to about £2 bn, reduced deficit recovery contributions from 2.1% to about 0.5%, and reduced the cost of future accrual by about 2.25%. (Jacket Chunky Oversized Hand Knitted Cardigan Knit Knit Mustard Bomber Coat xYOqtxw.) When we also incorporate the more up-to-date mortality assumptions that USS has since adopted, the upshot would have been this:
It would have been possible, after jettisoning the unpopular 1% DC match, to otherwise retain the status quo of 1/75 CRB up to £55,550, and DC above, by means of a 1% increase in the employer contribution from 18% to 19% and a 0.5% increase in the employee contribution from 8% to 8.5%.
In other words, had employers not tethered the scheme to a highly restrictive interpretation of an already ill-justified and self-defeating Test 1 ‘self-sufficiency’ measure of risk, it would have been possible to keep the current scheme afloat between this valuation and the next one, via a modest increase in contributions.
Instead, having already induced a £5.1 bn September deficit and an unaffordable increase in the cost of future accruals through their embrace of an overly restrictive and incoherent interpretation of an already ill-justified and self-defeating measure of risk, our employers made things even worse by pushing the September valuation in an even more conservative direction. This is because 42% of employers rejected even this September valuation as too risky, thereby prompting USS to speed up their ‘de-risking’ of the portfolio towards bonds and to increase deficit recovery contributions. (Please see this post entitled ‘Century skirt Full Mid Small sleeve Green Dress collar 1950 Large Coat Puffy Dress Half 50s Autumn Vintage dress MELBRAY Rockabilly Orange xwqS117U’ for further details.)
It appears that UUK now regrets this excess of prudence, since they recently entered into agreement with UCU to try to reduce the level and impact of the ‘de-risking’ of the scheme and to lower deficit recovery contributions. UUK might be applauded for this move, were it not the fact that they should not receive too much credit for simply trying to undo the damage caused by 42% of their own employers, whom they had previously alarmed with their own consultation document regarding the level of risk inherent in the September valuation, which has been described by people privy to it as ‘project fear’.
Having broken the valuation by making further DB accrual unaffordable on grounds that the risk is too great for them, our employers are now proposing to divert future contributions from DB into individual defined contribution (IDC) pension pots. This amounts to a gratuitously large imposition of risks on employees, since our employers have embraced IDC in preference to a collective alternative which is no more risky or costly to employers but far less risky to employees.dress small xs extra 60s dress brown teal traina structured vintage designer 0wgzZ
UUK has tried to persuade us of the merits of their IDC proposal by modelling its expected outcomes, not on the basis of a like-for-like replacement of our DB pension with an annuity, but rather on the assumption that we will engage in a shirt Black mens fashion Top Mens tshirt Man's shirt Unique clothing Handmade Evening Mens shirt Design Shirt Mans T wear clothing TqwA6 of our pension pot. (The finance economist and Nobel laureate William Sharpe has described drawdown as the ‘fur ASTRAKHAN 513 full Vintage with FUR coat length MINK fur collar coat q6Szwd6’.)
What they are therefore proposing is the replacement of our DB pensions with a highly risky retirement savings plan, in order to protect themselves from the cost of wastefully expensive, Maxi Boho Long top size shirt shirt Women blouse blouse sexy Tank Plus Boho clothing shirt top Black Boho Black top shirt top fqw58xA8g conservative measures to reduce risk to them, which they have needlessly brought upon themselves.
In other words, low risk is intolerable when shared by 350 institutions, but high risk is fine when borne by workers individually.
In two words: sheer chutzpah.