Michael Otsuka Profile picture
Oct 3, 2018 11 tweets 9 min read Twitter logo Read on Twitter
It has been over a month since @Sam_Marsh101 submitted his Addendum to the JEP and #USS. If he's right, the current valuation contains a significant, hidden layer of prudence ABOVE AND BEYOND the following that JEP lists here: 1/
I say more about the significance of Sam's Addendum in this blog post, where I also explain why #USS and @GuyCoughlan owe us an answer to Sam's findings. 2/
I believe that, so far, this is the only response @Sam_Marsh101 has received: 3/
In claiming that "the trustee's valuation methodology does not require the projection of assets based on current contribution rates" so they have not "sought to confirm these figures", #USS impales itself on the 2nd horn of the dilemma I sketch in my blog post above. 4/
In other words, #USS is failing to apply Test 1 in a manner that makes sense of its underlying rationale: namely, that the level of the assets at yr 20 be high enough that purchase of a self-sufficiency portfolio by yr 40 is affordable via +7% contributions from year 20-40. 5/
This would be yet another serious flaw with #USS's application of Test 1, above and beyond the flaws JEP describes here: 6/
Stakeholders @UniversitiesUK & @ucu should obtain a response from #USS in time to inform the employer's consultation on the JEP report before it closes on 30 Oct, as this bears directly on the question of whether the increased level of risk appetite JEP proposes is prudent. 7/
If @Sam_Marsh101 is right, then Sept de-risking satisfies Test 1, w/o the need to increase contributions above the current 26%, in order to fund the current level of DB & DC provision. 8/
And therefore JEP's proposed increase in contributions by 3.2% (+2.1% employer, +1.1% member) involves an extra layer of prudence beyond what is needed, on a proper application of #USS's own Test 1. 9/
That fact would give employers the confidence to embrace the level of investment risk in the JEP proposals and also serve to undermine any attempt by #USS to resist the JEP proposals as insufficiently prudent. 10/10

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More from @MikeOtsuka

Oct 6, 2018
.@UCL_UCU has responded on Twitter to my linked blog post "Questions for advocates of No Detriment". Below I expose two problems with their response. 1/
In that blog, I ask: "Do you think union members would vote to authorise a strike for a No Detriment elimination of their 1.1% rise for three years rather than accepting the JEP-modelled solution?" 2/
.@UCL_UCU's rejoinder is that they are proposing a negotiation of a No Detriment elimination of any rise in contributions, not only of the modest 1.1% over the next three years, but also beyond that three year period. 3/
Read 18 tweets
Oct 3, 2018
.@UCL_UCU branch officers reveal that they misunderstood an important aspect of the JEP report when they pushed for their No Detriment motion today. In the embedded tweet, they write that JEP "don't refer accrual rate to JNC": 1/
In my subsequent exchange with @UCL_UCU that begins with the embedded tweet, I demonstrate that it is just as clear that they refer accrual rate to JNC as that they refer cost-sharing to JNC. 2/2
Read 5 tweets
Oct 3, 2018
A query for @UCL_UCU regarding their tweet below: 1/
If employers call for a cut to DB accrual from 1/75 to 1/80 in order to keep employer contributions down to 19.3% on a 65%/35% employer/member cost-sharing basis, would that also be consistent, in you view, with acceptance of the JEP recommendations in full? 2/2
Here I elaborate on my above query, in an email to @UCL_UCU President Sean @SeanAWallis or anyone else who would like to respond:
Read 5 tweets
Sep 29, 2018
🚨💣😱.@Cambridge_Uni's response to a 2016 consultation re strength of the #USS covenant has recently been released via FOI. Cambridge disputes PWC's finding of a strong covenant over 30 as opposed to merely 20 years! The following statement in their response is a bombshell: 1/
"We would be concerned if the increase in visibility of a strong covenant was used to support a less prudent approach to the 2017 valuation than that adopted in 2014, either in terms of the assumptions adopted or the time horizon for de-risking." 2/
We are all aware that tPR's challenge, in their Sept 2017 letter, to the PWC/#USS assessment of the strength of the covenant, wreaked havoc on our DB pension and helped explain the shift to the more conservative November valuation. 3/
Read 25 tweets
Sep 26, 2018
JEP RECOMMENDATION #3: Smooth the cost of future service contributions over at least the next 6 years. As this chart indicates, this would reduce contributions by 1.5%. 1/
#USS's failure to smooth the cost of future service contributions constitutes a significant hidden layer of prudence. See this blog post: 2/
...and this blog post: 3/
Read 8 tweets
Sep 26, 2018
Now that @AlistairJarvis's @UniversitiesUK has opened the linked consultation, it's important for @ucu & #USS members to make the case to our employers to STRONGLY & PUBLICLY support all 4 JEP recommendations. Links below to arguments in support. 1/
Embedded thread w/ arguments in support of JEP recommendation #2, re lowering of deficit recovery contributions. 2/
Embedded thread w/ arguments in support of JEP recommendation #3, re smoothing of cost of future service, which draws on @Sam_Marsh101's cashflow data analysis. 3/
Read 20 tweets

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