Rising to the challenges

Universities Superannuation Scheme (USS) has continued to deliver good outcomes for members and employers in challenging conditions, according to its annual report published today.

Despite volatile market conditions, the Retirement Income Builder (the defined benefit element of the scheme) grew by £3.8bn to £67.4bn over the financial year to end March, taking growth over the last five years to £26bn.

Actively managing around three quarters of the scheme’s DB assets ‘in-house’ contributed to returns in a positive, cost-effective way:

• USS outperformed its ‘passive’ five-year rolling benchmark by 0.31% to 31 March 2019, adding £389m of value to the DB assets (net of costs). Independent benchmarking reports that USS investment costs are £71m a year lower than funds of a similar size and complexity, and its investment costs as a proportion of assets under management have fallen over the past five years by 0.13% (equivalent to almost £90m of savings for the current year).

The Retirement Income Builder is 92% funded (a £5.7bn deficit), based on monitoring of the 2017 valuation.

Around 85,000 members now have savings in the Investment Builder (the defined contribution element of the scheme) with assets totalling £0.8bn. The DC funds also continue to perform well, absolutely and on an asset-weighted basis relative to their benchmarks.

• Total scheme membership at 31 March 2019: 439,572 – 202,165 active, 165,075 deferred, 72,332 pensioner
• 33,182 members joined in 18/19, while 4,106 retired.

Professor Sir David Eastwood, Chair of the Board, said: “Valuable pension benefits are central to attracting and retaining the highest calibre of academics and support staff to our Higher Education sector, which enriches our society as a whole – so we have a critically important role to play.

“We acknowledge the challenges in levying higher contributions and have worked hard to find ways in which these can be escalated gradually, or made contingent on events.

“There are no easy answers to the challenges that low interest rates and the uncertainty of Brexit, university funding, and the global economy pose – but we remain resolutely focused on achieving excellent outcomes for members and institutions and on protecting all that is good about USS.”

Bill Galvin, USS Group Chief Executive, said: “Against a background of political and economic uncertainty, USS’s asset management has continued to produce results at a significantly lower cost than our global peers.

“USS prides itself on its long-term stewardship and this annual report evidences the high standards we deliver for members and our sponsoring employers. Our authorisation as a Master Trust earlier this year demonstrates our ongoing investments to meet increasing regulatory requirements.”