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Looking ahead to the #defenduss 60-day consultation

So USS. It strikes me that this was, in the end, a total and avoidable mess and the UCU should take a lot of responsibility.

The only way to find out what was going on was to check a friend of a friend’s facebook page. The only campaign resources were, well, whatever you came up with. The tactics were hopeless – the marking boycott never had strong support in the school I’m best informed about and not really anywhere else, and it had a number of real flaws, notably that only a handful of individuals were actually involved at any one time and that the timing meant most students wouldn’t be affected. The negotiating team seems to have been overawed by the issues involved and poorly prepared.

Further, the stand-down over Christmas seems to have been a bad idea, losing whatever momentum the campaign had built up. In part this was just going to be imposed by the Christmas break itself, but the problem is that it wasn’t a credible proposition to call everyone out again, and therefore it didn’t support the negotiators effectively. To be honest we might have done better as an amorphous online mob, but of course a lot of the work here is being done by UCU’s failure.

So now we’re stuck with the mad-headed scheme to hedge poor returns on gilts by buying yet more gilts, the gender and other problems of a CRB scheme, no answers about the AVCs, and a weakened union.

Mike Otsuka points out that the statutory 60-day consultation on USS should open in mid-March, and will work something like this, so it’s not exactly true that it’s all over but the shouting.

This is important, as it seems there is still some give about the length of the recovery period and therefore the annual wedge of money involved, the fate of the AVCs and added years, the management of the defined-contribution element, and the all-crucial valuation.

One thing the UCU did achieve was a commitment, for what it’s worth, that the USS benefits and contribution rates would be revised again if the finances improved significantly. This means it is well worth while keeping the valuation issue alive, and keeping the claim on any future improvement this represents alive.

Your ration of campaign material, therefore, is here, in a rather technical piece of Mike’s. The key issue is that Test 1 must die.

OK, that’s the long-term element. What about the short-term? Well, voting is now open for the UCU national executive committee, until Friday 27th February. (If you’ve not got a ballot, make a fuss, because the organisation sucks!) The UCU Left recommendations are here – I don’t warrant for them in any way (for example, does anyone believe they’ll reopen the dispute?), but the first step is always to chuck the bums out.

#defenduss arrives at an unsatisfactory compromise

So yer #defenduss.

The UCU delegation came back with a new offer, the same stuff but with a slightly higher accrual rate, some more money from the other side, a higher cap, and promises to use any improvement in the scheme finances to put back the cuts and also to review the valuation methodology. And it looks like two-thirds of one-third of the membership voted for it. One third of the membership that ever received a ballot.

Nobody seems to have any idea about the people who voluntarily put more money in, about what this further review means, or about how the defined contribution fund above the cap would work. On the other hand, nobody had any idea what the UCU’s strategy was if the dispute went on. The marking boycott had already been turned down by a lot of universities and nobody liked it in the first place.

There is now a statutory consultation period, for what it may be worth. The lesson, though, is that negative numbers are scary, and that the UCU can’t manage to send out e-mail. No song, because I’m not feeling it.

#simpleplan begins to scale up

A bit of #SimplePlan in action.

Enfield set up a wholly owned private company called Housing Gateway this year. Officials have viewed 122 properties, made offers on 77 and had 48 accepted. The company currently owns 22 homes and has tenants in five of them.

Oykener said he ensured tenants in those homes would not be eligible to take up the right-to-buy offer. “I specifically ensured that was the case. These special purchase vehicles, along with other benefits, are exempt from right-to-buy so that we won’t end up in this predicament in three years. We are not alone, councils all over are doing this.”

Other councils taking the radical step include Sheffield, Sutton and Ealing, according to Labour MP Gareth Thomas….

“Given the huge loss of affordable homes in London, in part because of the failure to replace those sold under the right-to-buy, the next mayor of London needs to consider setting up a London housing company to help build high-quality social housing, particularly co-operative housing of the sort found on London’s South Bank,” said Thomas.

I know Owen Hatherley will hate me for saying anything nice about Coin Street. But hey, it’s an emergency, dammit. (Speaking of him, not only is this a good piece, but most of the below-the-line screamers seem to think it’s by Owen Jones, who is not the same person.)

I note that Enfield has managed to double its properties viewed, close to double its offers, more than double its accepted offers, and multiply its closings by 10 since end-August (see discussion). The dream is alive.

Has anyone got numbers for the Sutton, Ealing, or Sheffield deployments?

#defenduss: so now we know.

Thanks, as always to Mike Otsuka, we have some insight into how the USS Trustees arrived at their valuation. Really briefly, they seem to have chosen a methodology appropriate for valuing a defined-benefit fund for closure, as opposed to one that will run on, and bish bosh, it becomes absolutely necessary to demand immediate closure.

If your plan is to close the fund, then it starts to look like an individual DC account just before retirement, and selling up the equities is obviously sensible. Selling them and buying government bonds hugely reduces the returns you might expect, and therefore, bang, you have your crisis.

I think the emphasis is now shifting from “fight the valuation” to “sack the board”. Here’s the message for them.

Meanwhile, the petition is handed in at Glasgow University in front of Adam Smith’s statue.

And here’s a new group for useful documents.

the wider relevance of #defenduss. defined contribution is the new sugar

As a spin-off from #defenduss, Martin O’Neill circulated this report by a US thinktank, which demonstrates that final-salary pensions are actually cheaper to provide than the defined-contribution sort.

The point is simple, but far from trivial – as Max Sawicky is fond of saying about US Social Security, a defined-benefit system is insurance, not mere saving. As such, it needs to finance payouts for the average life expectancy of its members, not the right tail out beyond the 97th percentile. This makes a huge difference to how much cash you need to contribute for each pound of pension entitlement. Further, because it’s a risk pool, the defined-benefit plan can stick with its higher-yielding investments for longer rather than flogging them and buying government bonds.

In fact, the only way moving to a defined-contribution system ever saves money is if it’s also a massive cut in benefits. Further, if it’s better in theory, it’s much better in practice, because multi-billion pension funds will always get a vastly better deal in the financial markets than individual savers, and it reduces the opportunities to fuck it up. Here’s the killer chart.


The maddening thing about this document is that I see absolutely no reason why it couldn’t have been issued in 1986, 1996, or 2006. Actuarial science is not new. Neither is insurance. These are technologies that are hundreds of years old now. But I can’t remember anyone making these points out in the public square in any of the endless rounds of Very Serious Debate about pensions, government and corporate efforts to wriggle out of their final-salary plans, and financial sector efforts to convince everyone that they can be trusted this time if we just buy a boatload more of their products. Even the opponents usually opted for either denial that anything was wrong, yelling harder, or else just whining that it wasn’t fair and why not do it to somebody else.

Nobody ever seemed to challenge the notion that defined-contribution was cheaper, which turns out to be not even close to true, for reasons that are inherent in its basic structure. Even I thought there must be some truth to it. It’s not that it would work with better investment returns, more contributions, lower admin costs, or some sort of tweak. It’s that insurance is a far better way of protecting yourself against risk than just putting cash in a shoebox, which is why it exists! And this is a big, fundamental difference. It takes a lot of Harberger triangles to fill an Okun gap, and it takes a hell of a lot of marginal improvement to make up the kind of gap they find here. It’s like when the medics realised it was the sugar that was killing people all along.

There’s nothing else to say.

The damage is done, of course, but this is one reason why #defenduss is a fight worth having, not just some bunch of entitled profs whining. And looky here! Even UUK seems to be weakening.

Imperial turns on the EPF – #defenduss news

A bit more #defenduss blogging. Imperial College, that most monopoly-minded of schools, has come out against the USS valuation and the EPF proposals. And it’s come out swinging, too – check out the statement here.

We are disappointed that you appear to be focused on trying to fit your current proposed benefit solution to the perceived problem without first sufficiently challenging all the assumptions.

We are concerned that without this challenge you risk recommending a major downgrading of one of our employees’ most important benefits based on numbers which are as likely to be modelling artefacts as a reflection of the underlying economic reality.


As you will see in the attached paper, our simplified model includes additional cases to those presented in the USS paper, and those that have used the
actual salary increments and investment performance of the last decade show the model fund in surplus

OUCH. And the hits keep coming. Go read, and push it on anyone you can in UCU, university management, etc. They might meet us half way, after all.