USS deficit level rockets to almost £3bn

The Universities Superannuation Scheme is nearly £3bn in deficit after its latest triennial valuation revealed the fund had plunged from a surplus of £707m since 2008.

The universities scheme is now officially 92% funded, down from 103% funded when it undertook its last valuation, with assets of £32.4bn against liabilities of £35.3bn - leaving a £2.9bn shortfall on the basis of its technical provisions.

Trustees of the scheme are currently finalising a formal recovery plan to be submitted to The Pensions Regulator laying out how it intends to fill the gap.

The scheme currently has 77.5% targeted allocations to equities and alternatives with just 12.5% allocated to fixed interest and index linked assets.

A USS source said the slump in funding would not lead to a complete overhaul of its strategy but it was revamping its statement of investment principles.

A USS source said: "We're not in the position where we've got to shift everything into gilts and indeed it would be foolhardy to do that at moment because returns are so poor. Of course being a large fund there aren't that amount of index linked gilts out on the market anyway.

"We have a dialogue with the regulator on a regular basis, they know where these numbers are coming from and we'll be seeking to reassure the regulator we can deal with this."

Last year USS made a number of changes to its benefit structure, including a move to career average for new entrants and the use of Consumer Prices Index inflation to uprate benefits, which were opposed by the University and College Union.

The funding shortfall could open up the possibility of university employers having to contribute more.
Institutions currently contribute 16% and members contribute 6.3%.

Employers and UCU announced the establishment of a working group in December to explore future changes to the scheme to make it more sustainable.