UK pension dilemma: my workplace scheme has 17.5bn deficit

[jade]

Hi all,

I'm looking for thoughts on this. USS (university superannuation scheme) who are my workplace pension provider have been found to have 17.5bn deficit (up 9bn since last year).
See below:

http://www.bbc.co.uk/news/uk-40763577

I joined last sept, so have been a member for less than a year. I've accrued about £5 k + in contributions according to my sums, at 9% of my pay contribution from me, and 19% from the uni.

It's a concern, though the employer contributions are excellent, I wanted to get the feedback of folks here.

Anyone else a member? Any suggestions or thoughts?

Thanks in advance!

[maizefolk]

Hard to interpret this line:

The USS said that it was backed by universities which had net assets of more than £50bn.

Is that saying the pension fund at 50 billion pounds in assets? Or that the universities that pay into the fund have 50 billion pounds in assets?

The first is somewhat reassuring as it means the fund has about 70% of the assets it should given its liabilities (for context, that would put it in about the 50th percentile of US state government pension funds in terms of its percent deficit). In that situation I'd be concerned but not panicked. Would you still have chosen the job you have if couldn't count on the 19% contribution to your retirement from the University, or would that be enough to have convinced you to take a job in the private sector?

The second is terrifying would suggest they're arguing the university should ultimately be forced to sell buildings or endowments to make up the deficit in the pension fund.

[jade]

Thanks maizeman... I'm not sure. Good questions, I'll put them to my pension dept tomorrow and let you know.

I have been in the job over seven years, the pension wasn't a deciding factor on the job, I only joined once our mortgage was paid off last year.

Thanks again.

Ps sorry all the duplicate postings... Darn phone won't delete them either!

[jade]

Hi again,

I've just found this msg on the USS website about it all.

https://www.uss.co.uk/how-uss-is-run/valuation/annual-report-and-accounts-2017-update


Im going to try and dicepher it more tomorrow but just to give more info for others reading that may understand the jargon better than I do!

Thanks again!

[maizefolk]

Well that say that the value of the fund is now about 60 billion pounds (up 20% this year), so I would say that is consistent with my first interpretation above, and you are probably no worse off than the median person the EU/North America with a public-sector pension.

In your shoes I would discount the value of any future pension to account for potential future benefit cuts, but it also depends how close you are to retirement age.

[cerat0n1a]

Most UK pension funds which have to pay out defined benefits have a deficit, due to current very low interest rates. If interest rates stay low, employers will need to contribute a lot more (and plenty of big companies will need to cut their dividends to fill the gap). If interest rates go back up, the problem goes away.

My suggestion would be to keep an eye on it from year to year, but not worry too much about it.

[dreams_and_discoveries]

Yeah, these defined benefits schemes don't look very sustainable, but any benefits accrued look secure, as they have a lot of assets and are committed to keeping them functioning. A good 10 year run in the stock market could easily sort it all.

If I was offered a defined benefit pension, I'd snap it up in a heartbeat; these are usually such amazing value to employees (the employer holds the burden of stock market volatility).

[jade]

maizeman - thanks again, that's good to know! I am 41 and hoping to be FIRE by 55, but I may defer withdrawing the work pension if I am able to. I have been roughly thinking that even if I just got the money back including employer contributions and it didn't grow, it wouldn't be too bad (if that makes sense)?

cerat0n1a - thanks for explaining re interest rates. I will keep an eye then and good to know I can pick the brains of  your good selves when needed!

dreams_and_discoveries thanks also, i did notice that are accrued benefits should be secure but wanted to check that keep on paying in makes sense, which it seems to overall. Good to know about their assets; USS is one of the / biggest pension providers for all UK universities as far as I know so I guess there should be a good commitment on their part. The contribution from the employer is quite amazing.

[AnswerIs42]

Don't forget about the Pension Protection Fund, which guarantees you 90% of the value of DB pensions. I wouldn't worry about it too much.

[jade]

Don't forget about the Pension Protection Fund, which guarantees you 90% of the value of DB pensions. I wouldn't worry about it too much.

I hadn't heard of that, thank you. Not too worried, just wanted to get some feedback in case it was worth stopping before I invested more. Cheers!