What is actually going wrong with the government.....this USS scandal is shocking....

hyubh

mattvolatile wrote: »

That's a weird non-sequitor. I'm not sure why you think any of my points would require denying these well known figures, because there's nothing in my post which even suggests that these things aren't true.

Care to explain what you meant by 'a bonus slice of (utterly demented) ideological commitment to (amongst other things) marketisation as a way of improving standards and the long-term erosion of the social contract'...? It was part of a policy to increase university access (an aim achieved), which is an odd way to go about furthering 'the long-term erosion of the social contract'.

LHW99

hyubh wrote: »

Care to explain what you meant by 'a bonus slice of (utterly demented) ideological commitment to (amongst other things) marketisation as a way of improving standards and the long-term erosion of the social contract'...? It was part of a policy to increase university access (an aim achieved), which is an odd way to go about furthering 'the long-term erosion of the social contract'.

Although unfortunately the number of graduate level jobs has not kept pace, hence the "graduate premium" is now reducing and we have people with degrees serving in Macdonalds

squeeks

Didn't quite understand the article.
The pension fund has "over" £60bn in assets.
Previously the pension fund predicted that there was a 50:50 chance that the fund meet its obligations and best estimate would have a 5.2bn surplus.


Prudential now want an extra £7.5bn to cover the same liabilities to take over the scheme.
PPF want an extra £23.1bn to cover the same liabilities to take over the scheme.


Not entirely sure how the £63.9bn Prudential cost - £7.5bn Prudential deficit equates to the "over" £60bn USS worth of assets though.


I believe all the forumlas have become more pesermistic in recent years, so I imagine any fund that was on track is now going to be classified as struggling.

hugheskevi

Didn't quite understand the article.

The key issue is how liabilities are valued, there are multiple different ways to value them, all involving different actuarial assumptions.

The pension fund has "over" £60bn in assets.

Assets are pretty straightforward to value and so remain constant throughout all methods of deficit calculation. It is liabilities which vary considerably depending on the actuarial assumptions used.

Previously the pension fund predicted that there was a 50:50 chance that the fund meet its obligations and best estimate would have a 5.2bn surplus.

So in this scenario, liabilities are valued at £54.8bn (assuming assets are exactly £60bn throughout for ease of illustration - hence the total liability figures stated are not accurate, and just included to for ease of understanding throughout the different scenarios).

Prudential now want an extra £7.5bn to cover the same liabilities to take over the scheme.

That isn't what the article says. The article says that if a measure of prudence is used in the calculation of liabilities, rather than best estimate assumptions, there would be a £7.5bn deficit. Therefore liabilities in this scenario are valued at £67.5bn.

If the scheme were to ask an insurer (eg the Prudential) to take over responsibility for making future pension payments, the deficit would be £63.9bn, thus valuing liabilities at £123.9bn. This is because an insurer would need to use very low risk assets (eg gilts) to back the payments, and hence asset returns will be low, requiring more initial capital to fund the liabilities and so creating a bigger deficit. This is referred to as 'full buy-out basis.'

PPF want an extra £23.1bn to cover the same liabilities to take over the scheme.

PPF level benefits are lower than full scheme benefits, as those below normal pension age only receive 90% of their pension entitlement and revaluation and indexation is reduced to statutory minimum levels. The funding assumptions are similar to those used for full buy-out calculations.

On a PPF level of benefits basis, the liabilities are valued at £83.1bn.

Given the rock-solid employer backing of the USS (technically known as the strength of the 'employer covenant'), this is not a particularly interesting scenario as it would only occur if no employer remained to stand behind the scheme. This would therefore require the bankruptcy/closure of most of the UK higher education sector.

Not entirely sure how the £63.9bn Prudential cost - £7.5bn Prudential deficit equates to the "over" £60bn USS worth of assets though.

The £7.5bn is the deficit calculated on a best estimate basis with a level of prudence used in the actuarial assumptions (nothing at all to do with the Prudential insurer).

hyubh

LHW99 wrote: »

Although unfortunately the number of graduate level jobs has not kept pace, hence the "graduate premium" is now reducing and we have people with degrees serving in Macdonalds

Insofar as that is the case, then the individuals affected never pay off their student loan and it gets written off. The idea attending university should give you an automatic right to a well paid job is... controversial.

GDB2222

squeeks wrote: »

Didn't quite understand the article.
The pension fund has "over" £60bn in assets.
Previously the pension fund predicted that there was a 50:50 chance that the fund meet its obligations and best estimate would have a 5.2bn surplus.


Prudential now want an extra £7.5bn to cover the same liabilities to take over the scheme.
PPF want an extra £23.1bn to cover the same liabilities to take over the scheme.


Not entirely sure how the £63.9bn Prudential cost - £7.5bn Prudential deficit equates to the "over" £60bn USS worth of assets though.


I believe all the forumlas have become more pesermistic in recent years, so I imagine any fund that was on track is now going to be classified as struggling.

The costs depend on interest rates for new long term investment. The costs are very sensitive to a small change in rates, as the change gets compounded for many years, representing the future lifetimes of the membership.

LHW99

Insofar as that is the case, then the individuals affected never pay off their student loan and it gets written off. The idea attending university should give you an automatic right to a well paid job is... controversial.

However that is how the introduction of fees was presented when first brought in. I have always felt that if the then TB government wished 50% of the population to be educted to degree level, then tuition fees should have been paid by the government. There is always the possibility of remaining at home to reduce living expenses, and given that many of the loans will never be repaid, it would probably have worked out no more expensive in the end.

FIRSTTIMER

I just think it is shocking that its come to that having read the news and read the information on here about it. Especially how they tried to gag the whistleblower who said the calculations were wrong but by that time the USS forced members to pay more which could have looked like they didn't need to.

I actually didn't realise just how understaffed and under qualified some people are who are in government such as pensions and civil service who are impacting loads of people and they haven't got the skills to do it. It said in the Financial Times that it took them over 6 months to review the whistleblower accounts because they didn't have the technical expertise in the government department to deal with it. That is ludicrous.

hyubh

FIRSTTIMER wrote: »

I just think it is shocking that its come to that having read the news and read the information on here about it. Especially how they tried to gag the whistleblower who said the calculations were wrong but by that time the USS forced members to pay more which could have looked like they didn't need to.

Sorry, but that's baloney. What you would consider a hardline position towards the scheme's funding is shared by the Pensions Regulator. The 'whistleblower', like the union, advocates a soft approach, because hey, everyone in a generous DB arrangement would like to keep it open to future accrual, right?

Pace what has been said on this thread, the USS is not 'basically underwritten by Government', and its major sponsoring employers are not tax-raising bodies. If things were allowed to fall into actual crisis, its size would tank the PPF.

There is no god-given right to lecturers having a DB scheme. Indeed, until the mid-1970s, the scheme available was pure DC. Dare I say, the hue and cry is also a bit out of place when there was no such noise as the DB schemes for support staff at the 'old' universities were steadily closed and replaced with much worse DC or cash balance arrangements.

FIRSTTIMER

Whatever you do, don't tell Jane Hutton that