Your money is in safe hands, says university pension scheme chief executive David Chynoweth.
The pensions industry is under close scrutiny. And rightly so. The funds involved are huge and those responsible for managing them must be seen to be acting prudently and to be giving their members a fair deal.
The conundrum facing all pension fund managers is how to balance the needs of the future by providing proper long-term pension protection, with the conditions of the present, while at the same time meeting the legitimate demands of contributors who do not want to contribute more than necessary.
We welcome the debate in The 色盒直播S on the pros and cons of the Universities Superannuation Scheme - the same points of view are discussed at our trustee meetings in an equally vigorous manner.
The entire structure of the USS reflects the fact that it was founded by universities for universities and works towards a common goal. The directors of the trustee company include four representatives of the Committee of Vice-Chancellors and Principals, two representatives of the Association of University Teachers and a pensioners' representative.
One of the major obstacles to communicating more efficiently with members, pensioners and universities is the sheer complexity of pensions legislation and associated tax issues, although thanks to the web, the tiniest detail of our USS rule book can be scrutinised at ww.usshq.co.uk.
The USS scheme provides far more than a basic retirement pension. The benefits - for ill health, dependants in the event of death in service and index-linked pensions, etc - are not generally available to those who have to provide for themselves, except at considerable extra cost.
It is misleading to say, as one contributor to the debate did, that the USS is "stuffed with more money than it knows how to deal with" and that we are silent about things that our members would find interesting.
Yes, we have a surplus of 8 per cent of assets over liabilities. The sum involved is many millions but that is simply because we are one of the biggest pension funds in the UK. There is nothing secret about this; the details are in our triennial actuarial valuation, published this month, the results of which were presented and discussed at our annual meeting for institutions. These details can also be found on our website.
Our assets are mostly held in the form of equities and their value can change significantly in the short term. The size of the so-called surplus is dependent on market values.
We are using some of this surplus to maintain the employers' contribution at its current rate of 14 per cent of annual salary; pay a 1 per cent special pension increase to pensioners; increase the lump sum death-in-service benefit from 2.5 to 3 times salary; and remove young spouses' reductions.
Some people have questioned the decision to peg employers' contributions at 14 per cent, suggesting that members' contributions of 6.35 per cent should have been reduced instead. Members' contributions are fixed. The long-term cost to employers of providing pensions is currently calculated by the actuary to be 16.3 per cent. This rate varies over time depending on investment returns, but the USS member institutions as employers are committed to pay the balance of cost. Employees carry no such risk.
The employers' percentage contribution is high. The heads of member institutions scrutinise the actuarial valuation carefully and the trustees are regularly reminded that the money could be used by universities for their own urgent financial needs.
Also questioned is whether or not the USS should change its arrangements to a 60ths pensions accrual rate in place of the existing 80ths accrual rate and a 3/80ths lump sum accrual rate.
This is regularly discussed by the trustees and we have reconvened a working party to report further on the issue.
If it was a simple choice of retiring on two-thirds of salary or just half, it is obvious which people would choose. But it is not as simple as that. In addition to our maximum half-salary pension, members also receive a tax-free lump sum of 1.5 times their final salary.
On retirement, USS members can choose to buy additional pension instead of taking the tax-free lump sum, but the majority, after doing their calculations, decide to choose the tax-free lump sum.
Because pensions are always changing and we want to achieve the best for everyone - employees and employers - we continue to keep all this closely monitored.
David Chynoweth, chief executive, Universities Superannuation Scheme.
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