Letter to the VC from the Cardiff University USS Actuarial Valuation Technical Group

Below is a letter sent from the Cardiff University USS Actuarial Valuation Technical Group to Cardiff University. A PDF version of the letter is available.

To: Cardiff University

Cc: Cardiff UCU

Sent by email

Dear Damian, Darren and Lisa


We would like to express our thanks to you for the continuation of the Cardiff University USS Actuarial Valuation Technical Group (henceforth the “Technical Group”). In the meetings leading up to the 2020 valuation, we provided our personal view on what we considered as the best interests of USS members when matters of valuation were concerned. Since the conclusion of pricing of benefits, we understand that our role has become primarily to offer technical views on USS based on evidence of finance and economics as well as that of governance of pension schemes. It is in the interests of both Cardiff University and Cardiff UCU to meet to discuss issues on for example pension
benefits and affordability.

We hope that the Technical Group can continue to provide useful information to all USS members working at Cardiff University and to university management. To this end, we would like to publish the Group’s views on USS in the public domain. We sincerely hope that transparent information will facilitate constructive meetings between Cardiff University and Cardiff UCU.

We note that the Technical Group’s view may have been considered by Cardiff University in its response to the USS’s recent consultation on the Statement of Investment Principles. The summary of our view can be found in Appendix A.

In addition to the Statement of Investment Principles, we also would like to ask Cardiff University, potentially in conjunction with Cardiff UCU, to follow the precedent of our GW4 peers, Oxford, Cambridge, Imperial College and other institutions and consider making a statement regarding USS’s 2020 valuation. A starting point for such a statement can be found in Appendix B.

As explained above, we would like to put the contents of Appendices A and B in the public domain.

Yours sincerely,

Members of Technical Group
Dave Atkins

Simon Rushton

Frank Sengpiel

Woon Wong

Appendix A: On Statement of Investment Principles

We share the concerns expressed in the Joint Letter signed by the VCs of universities of Cambridge, Oxford, Imperial College London, the summary of which is provided below1

  • There is an undue focus on the “gap to selfsufficiency risk metric”, which appears to be driving the investment strategy
  • The level and type of leverage proposed would import significant risks into the scheme
  • The timing of any increase in LDI (inflationlinked bond purchases) is poor and out of step
    with the work to review aspects of the USS Scheme

In particular, we think the USS’s proposed increase in LDI by leverage

  1. contradicts with its own view on derisking at low interest rates
  2. goes against its repeated assurance to stakeholders that selfsufficiency is a concept
    applicable only to valuation and will not be implemented as an investment strategy
  3. contradicts with the view held by the Joint Expert Panel (JEP), Valuation Methodology
    Discussion Forum (VMDF), the UUK actuary, the UCU actuary, and the Joint Letter

Appendix B: Call on USS

We call on USS for a new valuation that is moderately prudence and evidence based. We also call on USS to carry out a review of its governance so that academics can play a more active role in its valuation including matters such as valuation assumptions, and investment and funding strategies.

We believe that the recent benefit reforms brought by 2020 valuation are unnecessary. The deficit is caused by excessive prudence and failure to consider the postvaluation experience which has witnessed the scheme asset rises to a level that is more than sufficient to prudently pay for promised pensions.

1 See https://www.imperial.ac.uk/humanresources/payandpensions/pensions/uss/changes/whatthecollegeisdoing/jointletter/