Meeting 6

The Group received an update of the first meeting of the Valuation Methodology Discussion Forum (VMDF) which the Trustee had established to support and inform the development of the 2020 valuation. The VMDF comprised representatives from the two stakeholders and their advisers as well as representatives from USS, including Trustee Directors. The VMDF  had covered a lot of ground in its first meeting, including discussions on prudence and risk appetite. The Forum’s work would help inform the Trustee’s discussion document on the valuation which would be published in March. Both stakeholders and the Trustee agreed that the VMDF was a valuable forum. UCU and UUK said they thought the VMDF was looking more broadly and deeply at issues than was the case with previous groups and this was considered beneficial.

The Group discussed the JNC effectiveness workstream which it had commissioned. This workstream comprised representatives of the stakeholders and USS. It would hold a ‘kick off’ meeting on 18 February and would continue to meet with a view to providing an options paper for the Tri-partite Group in March, providing a short update in late February. The Tripartite Group expressed its thanks to all those who had volunteered their time to this workstream.

The Tri-partite Group continued its discussion on sustainability. It was agreed that sustainability was important for ensuring confidence in the Scheme. The Group agreed that sustainability in the context of a scheme like USS had many dimensions. But the group considered the dimensions to be most relevant for USS as: affordability, stability, clarity, adaptability, relevance and viability.

The Group started a discussion on rebuilding trust and confidence and the governance of the Scheme. Each party had set out areas which worked well, areas which worked less well and damaged trust and confidence and measures that could help restore trust and confidence. The Group agreed it would be helpful to continue this discussion at its next meeting.

Future meetings would receive feedback on the results of the employer consultation on the JEP report and the current issues under consideration. In addition, the Group would receive reports of the JNC effectiveness workstream and updates on the VMDF.

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Meeting 7

The Tri-Partite Group discussed the work of the Valuation Methodology Discussion Forum (VMDF) which had held three meetings. It was noted that the Trustee planned to issue a discussion document on the valuation methodology shortly. Stakeholders emphasized the need for the discussion document and the valuation process to be, and be seen, as collaborative – noting that it is the Trustee’s legal responsibility to set the assumptions. The importance of this document was recognized by all members of the Tri-partite Group.

The Group noted that the JNC effectiveness workstream had held a ‘kick-off’ meeting. This had been a positive meeting. Further meetings were being arranged in order that the workstream could produce an options paper for the Tri-Partite Group.

The Group continued its discussions on a agreeing a common definition of sustainability. It was agreed this should include a clear commitment to the fact that the Stakeholders and the Trustee wanted a sustainable scheme and to define what that means. The Tri-partite Group continued to refine the definition. It was agreed this should include the following features: affordability, stability, clarity, adaptability, relevance, and viability. It was agreed to review the statement further in order to clarify the positions of the Trustee and Stakeholders in the Scheme’s governance arrangements.

It was agreed to return to the question of trust, confidence and governance at a future meeting.

It was agreed that a report on the outcome of the UUK consultation exercise would be given at the next meeting.

The Tripartite Group continued to hold productive discussions.

The Group noted the progress that had been made regarding the creation of the Valuation Methodology Discussion Forum which the Trustee had established to support and inform the development of the 2020 valuation. It was noted that this Forum would meet for the first time at the beginning of February. The Group also discussed progress with the development of the JNC reform work stream.

The group went on to further consider a definition of sustainability. All parties considered this to be an important concept in the operation of the Scheme and that it would be helpful if the parties could coalesce around a common definition and have greater clarity to build a common understanding. The group considered the core components of sustainability for a scheme such as USS. It was agreed that the group would return to the issue.

It was agreed that further consideration of the question of sustainability would be considered that the next meeting. It was also agreed that future meetings would consider how to rebuild trust and confidence. The group also agreed to hold a discussion on responsible investment, noting that this was an important issue for members.

Joanne Segars

The Tripartite Group continued to hold productive discussions.

The Group considered and discussed the Valuation Methodology Discussion Forum which the Trustee had established to support and inform the development of the valuation. The establishment of this Discussion Forum was viewed as a positive development by Stakeholders. It was noted that the Discussion Forum would need to work at pace to ensure the valuation could be completed within the statutory time scale.

The Tripartite Group went on to continue its discussion on the creation of a Strategic Discussion Forum. The Purpose of the Discussion Forum would be to: consider longer term issues affecting the Scheme; build trust and confidence and to provide a forum for building common understanding; bring the parties together (though other bi-lateral discussions may still go on and be needed). It was not the role of the Strategic Discussion Forum to usurp the position of the JNC or function as a negotiating forum. USS would be regularly invited to the Forum to discuss areas of common interest and to support and enable discussions.  A summary of the Strategic Discussion Forum overview is attached.

The Group began to consider the JEP’s recommendations in relation to governance and the JNC.  It was agreed to ask a small group of representatives from each of the parties to produce an options paper which considered issues relating to the operation and effectiveness of the JNC, including their pros and cons.  The “Ask” for this workstream is attached.

The Tripartite Group reconfirmed that its role did not extend to consideration of benefit reform.

The Group received a helpful presentation from USS on scheme member opt outs and scheme demographics.

It was agreed that further consideration of the question of sustainability would be considered at the next meeting.

Joanne Segars

Strategic Discussion Forum – Overview

Summary of the Ask.

The parties continued their discussions on the recommendations of the second JEP report. The discussions continued in a positive spirit, with UCU, UUK and USS each engaging actively in the process.

The tripartite group received a report of the discussion held the previous day at the USSL Trustee Board meeting concerning the 2020 valuation and the tripartite talks. It was reported that invitations had been issued to stakeholders to take part in the Valuation Methodology Discussion Forum. This Forum would consider the emerging findings from the Trustee’s review of the approach to the valuation methodology, including the issues raised by the JEP’s second report, e.g. the Dual Discount Rate. The Board welcomed the continuation of the tripartite discussions. The Stakeholders welcomed the increasing visibility of the Trustee Directors through the extension of the Valuation Methodology Discussion Forum to stakeholders as well as through work already underway, including greater Trustee interaction at JNC meetings.

The tripartite group went on to consider the matter of sustainability in light of the JEP’s recommendation that the parties should coalesce around a broad definition of sustainability which recognises the specificities of USS whilst also respecting regulatory requirements. The tripartite group had a useful discussion and agreed that there were a number of areas important to a definition of sustainability suitable for a scheme such as USS. It was agreed to return to this issue at a future meeting. It was hoped that this could then form part of the valuation discussions.

The group went on to begin to map out how, by whom and in what order the recommendations of the JEP relating to valuation governance should be considered. It was agreed that some of the JEP’s recommendations sat primarily with individual stakeholders – e.g. the recommendation relating to employer representation rested with UUK. The meeting considered the JEP’s proposal for a Strategic Group to consider issues relating to the future direction of the Scheme. It was recognised that it was not the role of such a group to usurp that of the JNC, but rather that it should take a longer-term perspective than the JNC. It was further recognised that such a group, which would sit outside the formal structures set out in the Trust Deed and Rules, could play an important role in building trust and understanding between the parties. There was a discussion about the role and involvement of the Trustee in the Strategic Group, and a recognition that the group should be led by the Stakeholders, but that the Trustee would be invited to participate. It was agreed to consider further the scope of the group further at the next meeting.

The tripartite group then discussed the JEP’s recommendations relating to the JNC. It was agreed that an options paper should be developed for the tripartite group to consider. Each party would contribute to the development of the options paper and this work would be led by representatives nominated by each party.

The next meeting of the tripartite group would consider: a report back on the progress in establishing the Valuation Methodology Discussion Forum; the development of the options paper relating to the JNC; and the Strategic Group. It was also agreed that USS would present its research on Scheme member opt outs. It was agreed that it would be helpful for the tripartite group to continue to meet through February and March.

Joanne Segars

The parties held further constructive talks on a range of issues arising from the JEP2 report. It was agreed to publish a summary note of the first tripartite talks meeting which was subsequently published on the JEP website.

The parties held productive discussions, and made good progress, on developing a shared Scheme Purpose statement for the stakeholders to jointly agree and use. It was agreed it was important for the Stakeholders’ Scheme purpose statement and that currently used by the Trustee Company to fit together clearly. This would ensure that the different interests of the Trustee and the Stakeholders could be respected and recognised whilst also demonstrating a common interest and resolve.  The Stakeholders’ scheme purpose statement discussed at the tripartite talks is attached alongside the purpose statement of the USS Trustee.

Positive discussions were also held on Shared Valuation Principles, the purpose of which provides a basis for UCU, UUK and the Trustee will work together and approach future valuations. The shared valuation principles discussed at the tripartite talks are also attached.

It was agreed that the next meeting would consider the question of sustainability and start to map out how, and by whom, possible governance  changes might be addressed. It was also agreed the group would receive a report back from the USSL Board meeting which was due to meet on 22 January to consider, amongst other things, the JEP2 report and the tripartite talks.

Joanne Segars

Statements of purpose and shared valuation principles

The tripartite group held a productive first meeting. Each body (UCU, UUK and USS) expressed their commitment to a collective dialogue. There was an agreement to reach a better understanding and to have a full discussion on the recommendations of the JEP2 report, recognising substantial alignment of interests.

There was a willingness to discuss all of the issues and recommendations. There was a recognition that some of the recommendations fall more naturally to one or to some parties than to all. But there was also a recognition that some of them will require a genuinely collective discussion.

It was agreed that the next meeting would consider a Scheme Purpose Statement and the Shared Valuation Principles.

Joanne Segars
Chair, Joint Expert Panel

The second report of the Joint Expert Panel (JEP) is published today (13 December).

The Panel was set up by UCU and UUK following the 2018 industrial dispute over the USS pension fund. The Panel comprises senior figures from the pensions sector as well as academic experts from within higher education and is chaired by Joanne Segars OBE.

Following its first report into the 2017 USS valuation, the Panel was commissioned by UCU and UUK to produce a further report aimed at establishing “key principles to underpin the future joint approach of UUK and UCU to the valuation of the USS fund”.

The Panel’s report makes a series of interlocking recommendations covering the governance of the Scheme, the valuation methodology and the way forward including:

• the establishment of a new, jointly agreed purpose statement and shared valuation principles;
• creation of a series of joint bodies within USS including a valuation forum and a high-level joint union/employer steering committee to agree issues relating to the future direction of the Scheme;
• improvements to the operation of the Joint Negotiating Committee which comprises UCU and UUK representatives.
• agreement to a more appropriate valuation methodology driven by the agreed purpose of the scheme and a re-articulation of the Trustee’s, employers’ and employees’ risk appetites;
• the adoption of a dual discount rate approach to the USS valuation which would distinguish between past and future service, better reflect the demographics of the Scheme and automatically evolve as the Scheme matures; and
• investigation of different approaches to contributions in order to address the high level of Scheme opt outs among younger and lower paid staff.

The Panel considered a great deal of evidence on the sharing of the USS risk across the sector and wishes to affirm its belief that the mutuality of the scheme remains a great strength and that moving away from this could damage its future.

The Panel has set out a road map for the parties to work jointly towards implementing its recommendations and believes that a failure to urgently address the issues raised in this report would be a disaster for members, employers and the sector. The Panel therefore proposes that the Stakeholders and Trustee come together in a facilitated process.

Joanne Segars, chair of the JEP said:

“Our recommendations, which should be considered as a package, are rooted in the belief that the USS is of crucial importance to members, employers and to the health of the higher education sector. We propose significant changes to governance and valuation methodology, each of which may be difficult for individual parties to accept. However, as work on the 2020 valuation commences, employers, unions and the Trustee must urgently come together through a facilitated process to make them work.

“The JEP does not underestimate this task, but we believe that it would be failure for Scheme members, sponsoring employers and the sector if our recommendations are not seriously considered”.

Notes:

1. The Panel’s members are: Joanne Segars OBE (Independent Chair), Ronnie Bowie (appointed by UUK), Sally Bridgeland (appointed by UUK), Chris Curry (appointed by UUK), Bryn Davies (appointed by UCU), Saul Jacka (appointed by UCU), Deborah Mabbett (appointed by UCU). Biographies are here
2. The Panel’s purpose, as set out in the terms of reference, was to establishing “key principles to underpin the future joint approach of UUK and UCU to the valuation of the USS fund”.

For further information: chair@ussjep.org.uk

UCU can be contacted at press@ucu.org.uk

UUK can be contacted at pressoffice@universitiesuk.ac.uk

The report of the Joint Expert Panel (PDF)

Additional research into Member Voice (PDF)

The Panel are finalising their second report and are confident of publishing soon. The Panel wishes to thank all those who have contributed to their work. This has been invaluable as has developed its thoughts, the wider understanding and appreciation of the views of stakeholders.

The Panel discussed and reviewed the draft report and its core recommendations.

The Panel explored further analysis on possible alternative paths to the valuation and wider considerations of sustainability of the Scheme.

The drafting process and testing of conclusions is in the final stages and should complete their  work by the end of the year.

The Panel hopes that its recommendations, once published, will have a positive influence on all stakeholders and we will communicate further once we are ready to issue our report.