{"id":6109,"date":"2017-09-19T09:59:48","date_gmt":"2017-09-19T09:59:48","guid":{"rendered":"http:\/\/www.dannydorling.org\/?p=6109"},"modified":"2022-09-27T20:31:23","modified_gmt":"2022-09-27T20:31:23","slug":"full-text-of-original-letter-sent-to-the-financial-times-examining-the-numbers-on-pension-valuations","status":"publish","type":"post","link":"https:\/\/www.dannydorling.org\/?p=6109","title":{"rendered":"Full text of original letter sent to the Financial Times: Examining the numbers on pension valuations"},"content":{"rendered":"

We are concerned about the transparency of decision making in the USS pension scheme. The USS has announced a substantial deficit, but the data and methods they have published are very limited, making them impossible to judge.<\/p>\n

The USS manages \u00a360bn in assets on behalf of its members. The most recent USS accounts and reports indicate the scheme has a large deficit. However, the USS provides insufficient information about the methods used to value its assets and liabilities. They present no confidence intervals around the point estimate of the deficit, indication of estimation error, or any sensitivity analyses. They provide virtually no details of what data or analytic code they used to come to their conclusions. Even the CMI 2014 report underpinning the mortality assumptions is not publicly
\navailable.<\/p>\n

The USS and Mercer list the assumptions used on page 106 of the most recent report.<\/a> They also indicate how they have changed the assumptions between 2013 and 2017. In brief, they assume:<\/p>\n

1. A fall in the expected long-term nominal investment return from 4.7% to 2.8%.
\n2. An increase in general pay growth from CPI (2.6%), to RPI + 1% (4.4%).
\n3. Life expectancy increasing by 1.5% per year.<\/p>\n

We find these assumptions curious. First, how can expected investment returns have fallen by 40% in four years? Surely a collapse in returns on this scale would be reflected in the equity or bond markets? Equity markets in high income countries are up 51.7% in the last four years (11% per year). Their assumptions are consistent with a 0.33% per year return on investments after CPI. Is this rate of return possible without a global recession?<\/p>\n

Second, in 2014 the USS assumed cumulative pay growth over the following four years of 16%. Yet general pay increases have fallen well short of this, cumulatively increasing by 5.8%. Their estimates of the deficit assume that in future general pay will rise at a rate of RPI +1% (4.4% per year). Is there any evidence that universities will award cost of living increases at this rate? Furthermore, the ONS and the RSS has repeatedly warned that the RPI is a flawed measure of inflation, and should not be used. So why are the USS using it to estimate the deficit?<\/p>\n

Third, there has been little increase in life expectancy since 2011. The Institute and Faculty of Actuaries estimates that mortality is around 11% higher in 2016 than would have been expected based on the historical trend. This means life expectancy is lower, which will lower the USS\u2019s liabilities.<\/p>\n

A shorter version of this letter was published by the Financial Times on September 19th 2017. The link to that and a PDF of this version can be found here<\/a><\/p>\n

Prof Steven Julious<\/strong>
\nProfessor of Medical Statistics, University of Sheffield
\nProf Mark Gilthorpe<\/strong>
\nProfessor of Statistical Epidemiology, University of Leeds
\nDr Fred Martineau<\/strong>
\nClinical Research Fellow, London School of Hygiene and Tropical Medicine
\nDr Abigail Fraser<\/strong>
\nReader in Epidemiology, University of Bristol
\nProf Danny Dorling<\/strong>
\nProfessor of Geography, University of Oxford
\nProf Yoav BenShlomo<\/strong>
\nProfessor of Clinical Epidemiology, University of Bristol
\nDr Rhian Daniel<\/strong>
\nReader in Medical Statistics, Cardiff University
\nSedona Sweeney<\/strong>
\nHealth Economist, London School of Hygiene and Tropical Medicine
\nDr Ben Goldacre<\/strong>
\nSenior Clinical Research Fellow, University of Oxford
\nProf Charles Taylor<\/strong>
\nProfessor of Statistics, University of Leeds
\nDr Joanna Reynolds<\/strong>
\nAssistant Professor, London School of Hygiene and Tropical Medicine
\nSandra Mounier-Jack<\/strong>
\nAssociate Professor, London School of Hygiene and Tropical Medicine
\nProf Steven Haberman<\/strong>
\nProfessor of Actuarial Science, Cass Business School, City, University of London
\nProf Andrew Clare<\/strong>
\nAssociate Dean, Cass Business School
\nDr William Johnson<\/strong>
\nLecturer, Loughborough University
\nProf Kate Tilling<\/strong>
\nProfessor of Medical Statistics, University of Bristol
\nCatherine Pitt<\/strong>
\nAssistant Professor of Health Economics, London School of Hygiene and Tropical Medicine
\nProf George Davey Smith<\/strong>
\nProfessor of Clinical Epidemiology, University of Bristol
\nDr Eleanor Hutchinson<\/strong>
\nAssistant professor, London School of Hygiene and Tropical Medicine
\nProfessor David Spiegelhalter<\/strong>
\nProfessor of Biostatistics, University of Cambridge
\nDr Tara Beattie<\/strong>
\nAssistant Professor, London School of Hygiene and Tropical Medicine
\nProf Saul Jacka<\/strong>
\nProfessor, University of Warwick
\nProf Martin Bobak<\/strong>
\nProfessor of epidemiology, University College London
\nDr Beniamino Cislaghi<\/strong>
\nAssistant Professor, London School of Hygiene and Tropical Medicine
\nProf Jonathan Sterne<\/strong>
\nProfessor of Medical Statistics and Epidemiology, University of Bristol
\nDr Luisa Zuccolo<\/strong>
\nSenior Research Fellow, University of Bristol
\nDr Natasha Howard<\/strong>
\nAssistant Professor, London School of Hygiene and Tropical Medicine
\nNeil Davies<\/strong>
\nResearch Fellow, University of Bristol
\nProf Tim Cole<\/strong>
\nProfessor of medical statistics, University College London Great Ormond Street Institute of Child Health
\nDr James Woodcock<\/strong>
\nProgramme Lead, University of Cambridge
\nDr Hynek Pikhart<\/strong>
\nReader in Epidemiology and Medical Statistics, University College London
\nDr Ana Maria Buller<\/strong>
\nDeputy Director Gender, Violence & Health Centre, London School of Hygiene and Tropical Medicine
\nDr Shelley Lees<\/strong>
\nAssociate Professor in Anthropology of Gender, Violence and HIV, London School of Hygiene and Tropical Medicine
\nProf Graham Medley<\/strong>
\nProfessor of Infectious Disease Modelling, London School of Hygiene and Tropical Medicine
\nProf Marcus Munaf\u00f2<\/strong>
\nProfessor of Experimental Psychology, University of Bristol
\nDr Josephine Borghi<\/strong>
\nAssociate Professor, London School of Hygiene and Tropical Medicine
\nProf Peter Green<\/strong>
\nProfessorial Research Fellow, University of Bristol
\nDr Sam Marsh<\/strong>
\nTeaching Fellow, University of Sheffield
\nProf Guy Nason<\/strong>
\nProfessor of Statistics, University of Bristol
\nProf Chris Metcalfe<\/strong>
\nProfessor of Medical Statistics, University of Bristol
\nDr Laura Howe<\/strong>
\nReader in Epidemiology and Medical Statistics, University of Bristol
\nBenjamin Palafox<\/strong>
\nResearch Fellow in Pharmaceutical Policy & Economics, London School of Hygiene and Tropical Medicine
\nDr Fern Terris-Prestholt<\/strong>
\nAssociate Professor in the Economics of HIV, London School of Hygiene and Tropical Medicine
\nDr Krishnan Bhaskaran<\/strong>
\nAssociate Professor in Statistical Epidemiology, London School of Hygiene and Tropical Medicine
\nProf Bianca De Stavola<\/strong>
\nProfessor of Medical Statistics, University College London
\nProf Martin McKee<\/strong>
\nProfessor of European Public Health, London School of Hygiene and Tropical Medicine
\nDr Clare Chandler<\/strong>
\nAssociate Professor, London School of Hygiene and Tropical Medicine
\nDr Aaron Reeves<\/strong>
\nAssociate Professorial Research Fellow, London School of Economics
\nMatthew Quaife<\/strong>
\nResearch Fellow, London School of Hygiene and Tropical Medicine
\nDr Giulia Greco<\/strong>
\nAssistant Professor and MRC Fellow, London School of Hygiene and Tropical Medicine
\nProf Caroline Relton<\/strong>
\nProfessor, University of Bristol
\nProf Qiwei Yao<\/strong>
\nProfessor of Statistics, London School of Economics
\nDr Melisa Martinez-Alvarez<\/strong>
\nAssistant Professor, London School of Hygiene and Tropical Medicine
\nProf Simon Wood<\/strong>
\nProfessor of Statistical Science, University of Bristol<\/p>\n","protected":false},"excerpt":{"rendered":"

We are concerned about the transparency of decision making in the USS pension scheme. The USS has announced a substantial deficit, but the data and methods they have published are very limited, making them impossible to judge.<\/p>\n","protected":false},"author":1,"featured_media":9428,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[19],"tags":[],"class_list":["post-6109","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/posts\/6109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6109"}],"version-history":[{"count":4,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/posts\/6109\/revisions"}],"predecessor-version":[{"id":9429,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/posts\/6109\/revisions\/9429"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=\/wp\/v2\/media\/9428"}],"wp:attachment":[{"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dannydorling.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}