2020 valuation: technical information
Questions asked in the UUK consultation with employers
UUK’s consultation with employers launched on Wednesday 7 April and will run until Monday 24 May.
Covenant support measures
1. Would you be willing to support the alternative covenant support package which UUK has outlined in section 3, as the means to achieve a solution which might be acceptable in the round (see also question 15)?
2. If the USS Trustee is not willing to accept UUK’s alternative proposal (should there be employer support for it), would you be willing to support the USS Trustee’s scenario 3 covenant support package to obtain a ‘strong’ covenant rating? If not, why is this and what level of covenant support would you be willing to provide?
3. Are there areas of the covenant support measures which cause you particular concern, or which you would wish to see modified? Please provide details.
4. Are there other areas of covenant support you would wish to consider such as contingent contributions or asset pledges?
5. Do you agree that the current levels of employer contribution (21.1% of salary) and member contribution (9.6%) are the maximum sustainable – and should be the foundation for any solution?
a. If not, please state the level of employer contribution you would be willing to pay to USS following the 2020 valuation.
b. We would welcome any commentary on the reasons for your views.
c. We would also welcome employer views on the level of member contribution.
6. Do you support the broad principle of seeking to retain the hybrid benefit structure?
7. Looking at the illustrative hybrid benefits which UUK has put forward, would you consider this an acceptable outcome in terms of benefits at this valuation – based on the positions on covenant support and contributions laid out?
8. If the illustrated hybrid would not be acceptable, what alternative benefit arrangements would you wish to provide (and please indicate alternative positions on covenant and contributions as appropriate)? (For example, if the USS Trustee does not ultimately amend its assumptions, would you wish to offer a hybrid solution as set out in the USS Trustee’s illustrations (p18 of the Update Report) or would you prefer to move to a different offering, such as DC provision?)
9. Would you wish to explore conditional indexation or other conditional benefit models as a possible solution (likely longer-term, beyond the 2020 valuation)?
Flexibilities and options
10. Would you like to see flexibilities implemented for members to move away from the current uniformity of the USS structure, and if so which flexibilities do you think are particularly important?
11. Would you support the creation of a lower cost saving option for members and which of the parameters described in this paper are most important / or would need modification? (If yes, we would welcome employer views on the options to achieve this (potentially informed via engagement with eligible USS employees).)
12. Would you support the creation of an option for members to switch (from the hybrid structure) to wholly DC pension saving? (We invite employer views on whether the same deficit recovery contribution should be made for members choosing any new flexible DC alternative option, and what levels of member and employer contributions devoted to DC pensions saving should apply).
13. Would you wish to explore options for employers so that they can offer some variations to the USS standard benefits in the future – and if so, what would those variations be?
14. We would welcome views from employers in relation to the governance of the scheme and the valuation process (including views on the Joint Negotiating Committee). Specifically, would you support a post valuation governance review, and what areas what you like to see covered in such a review?
UUK alternative approach
15. As part of a solution to the 2020 USS valuation would you support the alternative covenant support package illustrated by UUK (headlines – moratorium of a minimum of 20-years with debt-monitoring and a paripassu arrangement for secured borrowing above c15% of gross/net assets), to provide a hybrid benefits package at current contribution rates in the order of (pension accrual of 1/85 of salary [plus 3 times lump sum] up to a salary threshold of £40,000 with the CPI indexation of benefits [for active, deferred and pensioner members] capped at 2.5% per annum, and with DC above the salary threshold at an overall contribution of 20% of salary), together with a lower cost alternative to address the high opt-out rate, as well as a governance review of the scheme and valuation process?