Saturday, 29 July 2017

University finances face £17.5bn pensions squeeze

Universities face a new blow to their finances after the main pension fund deficit soared to £17.5bn.

The Universities Superannuation Scheme now has the largest pensions deficit of any UK pension fund after it increased by £9bn last year.

One expert said student fees may have to rise or be diverted from teaching.

But a USS spokesperson said the pensions are "secure, backed by a solid investment portfolio and the strength of sponsoring employers."

The USS funds pensions for academics who are mostly based in the pre-1992 universities, and has more than 390,000 members.

To ensure the fund remains solvent, the USS will have to submit a plan to the pensions regulator to reduce the size of the deficit, which was first reported in The Financial Times.

That could mean cutting the value of future pay-outs, increasing staff contributions or raising employer contributions, putting pressure on university budgets.

John Ralfe, an independent pensions consultant, said: "It seems inconceivable to me that student fees will not have to be diverted into plugging the pension deficit.

"That means either they go up or there is a smaller amount of money that can be dedicated to teaching and research. And obviously the student fees that are paid are for teaching and research, not to pay for the folly of USS betting on equities over the last few years."

The pensions deficit has grown rapidly since 2014, when benefits were reduced for new entrants to plug a £5,3bn deficit.

BBC     News.