USS reports itself to TPR following breach of funding measure amid market volatility

The measure breached by USS relates to the ability to remain ‘self-sufficient' and pay pension promises without additional calls on employers for contributions.

A statement from the scheme explained: "The metric in question is the ratio of the low-risk ‘self-sufficiency' deficit in the scheme to the present value of 10% of employer payroll contributions (annually) over 30 years.

"If that ratio exceeds 85% for five consecutive business days then we must inform the regulator and consider appropriate action(s)."

The USS breached the funding measure ratio for the fifth consecutive day on 12 March and the trustee board will now consider whether contributions from employers and members need to increase.

The scheme's funding levels reflect current market volatility amid the coronavirus outbreak.

A USS spokesperson said: "As a long-term investor, we have agreed with our sponsors a long-term approach to funding the scheme.

"Our pension promises are secure because they are supported by the strength and longevity of employers in the UK higher education sector. It is important these sponsors are clear on the funding position and on their commitment to the scheme should our assumptions prove inadequate.

"Our current view is that Covid-19 will have a very significant near-term impact but is less likely to have a material impact as we look further out. However, market conditions mean that any forward look is challenging, and will take time to work through, which is the focus of the 2020 valuation."

The development comes as the USS is due to agree its 2020 valuation on 31 March.

The spokesperson continued: "The 2020 valuation provides an opportunity to take a calm and considered approach to assessing current conditions and any changes to the long-term outlook. We will be able to review and potentially reflect ‘post-valuation experience' as we work through the process.

"We will, however, continue to respond to our stakeholders' needs and priorities in light of the very challenging and constantly evolving circumstances we are all facing. As such, the timeline for valuation related activities will remain under review."

In a letter sent to heads of participating USS institutions yesterday (17 March), group chief executive Bill Galvin noted: "We recognise that there will be significant and understandable concerns among our sponsoring employers and membership in general, particularly as we approach 31 March 2020.

"Our current view is that the impact of Covid-19 will be very significant over the near-term. The impact is more likely to be less material as we look further out… It is impossible to be confident at this point on the long or short-term impacts.

"We will not rush to judgement on how to deal with the current circumstances. We will remain vigilant and continue to monitor market indicators; we will continue to monitor the way in which the sector's potential support for the scheme in the long and short-term might be affected."

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