USS Complaint Response and Legal Action

The USS has responded to our second stage USS complaint which we submitted on behalf of 3,383 colleagues from across the UK on 18th August 2021, which followed our first stage complaint submitted on 22nd January 2021.

In their response, and rather than answering any of the questions, they closed our complaint because we have submitted an application to the high court to proceed with legal action on behalf of USS Limited, the company that runs our pension scheme, against the directors. In total, our complaint was under consideration by the USS for 187 days.

Here are some extracts from the second complaint:


If the USS Trustee wishes to convince employers and members that this change in valuation methodology is necessary, according to pensions regulation, they must present reasonable evidence to support these claims. However, as indicated by the response to our complaint, to date USS has been unable to provide any legal, demographic or economic circumstances that justify increasing the level of prudence in investment returns from 67% to 80%+.


We asked whether the Trustee has assessed the equity of its proposals for the 2020 valuations. The Trustee has responded that it has not assessed the equity of its proposals in any way.


To meet the fiduciary duty it owes members and to comply with legislation, the USS Trustee must be able to demonstrate that its process for the 2020 valuation was reasonable, i.e. that assumptions were set according to reasonable evidence that is relevant to the scheme. Critically, the USS must not reverse engineer the valuation assumptions to achieve a given outcome. From the documents provided, it appears that the level of prudence has been set in order to achieve a predetermined discount rate.


[…] the USS is proposing assuming such a high level of prudence that 30 year returns are 4.7 fold lower than were experienced during the First World War that destroyed much of Western Europe. In the 116 years between 1870 and 1985, 30 year returns averaged across these 16 countries have never been as low as the USS are proposing. Martin Wolf, Chief Economics Commentator for the Financial Times wrote ‘in the case of the USS, the right option is to make conservative, but not insanely pessimistic, assumptions and conclude that it is healthy’. Is it reasonable to assume a discount rate consistent with a global economic collapse? Are there any long term economic forecasts that are predicting such a collapse?


The USS FMPs have reduced the expected rate of return from between 0.0% and 0.2% +CPI, that they are proposing for the 2020 valuation to -0.75% + CPI. By contrast, the lowest 30 year return ever recorded in the Jorda et al. (2019) dataset is 0.9% above inflation; I.e. the FMP reports are forecasting historically unprecedented levels of investment returns that have not occurred in modern history in 16 developed countries representing the majority of global capital markets.

…but USS are still saying our pensions are unaffordable.

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