The notion of a pension fund deficit is slippery. Currently, the USS pension scheme is not in deficit: in 2017, assets generated £2bn income and paid out £1.8bn to existing pensioners. This on the basis of a massive £60bn asset base. But, evaluations of the fund’s financial sustainability do not make a simple balance of a previous period’s assets and liabilities. Instead they make predictions. These predictions require a lot of guesswork. The main areas of guesswork relate to the estimated performance of the fund in terms of its investments, the general expectations about the change in the price of shares and gilts, rates of interest, economic growth, and the demands put on the pension scheme by future retirees.
The USS’s annual reports and triennial reviews show a bewildering set of definitive statements about deficit in which the level of deficit varies wildly. Drawing from the USS statements reported in the Times Higher: £2.9bn (2011), £9.8bn (2012), £11.5bn (2013), £5.3bn (2014), £13bn (2014), £7bn (2014 again), £10bn (2016), £5bn (2017), and most recently £7.5bn. These are figures each presented as true presentations of present-day financial situations rather than the futurology that they quite clearly are.
This draws criticism from some pension advisers precisely because there is no positivist science here, no trend, no predictability. Consequently, one would be more advised to develop a range of scenarios based on varying degrees of pessimism and optimism. This would mean both owning up to a certain degree of judgement about the performance of a pension fund and it would also open up a broader discussion about what might be construed as a reasonable estimation of risk and deficit. After all, deficit in itself is not necessarily a problem. The USS has consistently aimed to avoid this more open and deliberative procedure by making singular statements about deficit, usually as if a great gap in the balance sheet has just been discovered in real time. It is also the case that the UUK’s judgement of USS future deficit is about as pessimistic as it could be, as if it yearns for as much future austerity as possible. It creates deficit scenario max and deploys it to impose austerity reform max.
The effects of this nuancing of the situation are fairly obvious. At certain points when the USS fund managers (and the UUK) wish to propose greater austerity in the USS scheme, it does so with one of its deficit bombshells. It seems unaware of how often it revises its deficit figures. It does not seem to consider that its shifting guesswork raises questions about whether it is doing a good job. After all, what sort of fund managers start crying de-risk and prudence after the crash of 2008 but still cannot maintain any control over the deficit at all in spite of a constant and predictable inflow of assets from employers and employees and a moderate economic recovery?
What USS is mainly concerned with is setting a premise for discussions about the pension fund in which all interested parties are responding to deficit crisis terms of reference. Deficit is, in the Foucauldian sense, productive in that it generates a certain kind of political discourse. It leads to discussions with UUK and then the UUK and UCU in which, typically, UUK identifies models of austerity and the UCU resists until a compromise is reached. The effect is a ratcheting down of pension entitlements through the announcement deficit panic again and again. Today’s hard bargain in the name of pension certainty is tomorrow’s benchmark for another deficit panic.
Thus, since 2008, the austerity-deficit machine has done the following. There has been a removal of final salary pensions in which exit salary sets the level of one’s pension towards career revalued benefits in which a lower average salary constitutes the benchmark. There has been a reduction in the income ceiling after which employer contributions decline. The pensionable age has increased. Staff contributions to the pension fund have increased – effectively a loss in current salary to maintain a future pension. And, of course, in the current dispute, the original UUK proposal was to get rid of defined benefits altogether, allocating risk to staff in the name of ‘de-risking’ and claiming that lower expected yields meant that perhaps as much as £10,000 would be lost from early-career worker’s pensions. This is essentially more risk and less reward for staff.
Taken together, quite plainly, the USS and UUK logic is to reproduce narratives of risk and deficit in order to cut pension entitlements. The USS pension fund is managed as an austerity machine, systemically predisposed to maximise assets and cut back on liabilities.
This logic fits well with UUK, the cabal of senior university management led by Vice Chancellors and Bursars which claims, bewilderingly, to be the voice of universities. The UUK advises and instructs the USS based on the USS’s own financial reviews. There is a comity of worldview and interest here and it is perhaps best encapsulated in that apparently neutral financial term ‘liability’. This term can be used differently in different financial institutions, but here it means the predicted obligations to pay out staff once they reach retirement age. In normative discourse, ‘liability’ tends to connote something negative: a risk of harm cased by the presence of something or someone. How apt. It is the case that for both UUK and USS, staff are a cost, and that cost is borne inasmuch as an employer can reasonably compel workers to generate income through student fees and research overheads. Once these staff retire, they are all liability and no asset. For USS fund managers, retired staff are insufficiently dead.
And, as some universities seek to borrow in financial markets and take on large real estate investments this mind-set must surely increase: pensions are a liability for credit rating. Lower and more predictable pension ‘liabilities’ doth a financially creditworthy modern HE institution make.
This is bullshit of the highest order. Pensions are deferred income earned by university staff, assets partially matched by employers and given to an institutional investment fund with the purpose of generating a secure income transfer scheme to retire in comfort. There is a staggeringly Orwellian manoeuvre at play here. The staff who pay into the scheme do so in order that fund managers (who are very generously remunerated) generate a stable retirement payment schedule. In institutional economics, the staff are the principals who instruct and pay fund managers (the agents) to create a rewarding pension income stream. But, the plot twist is that workers are generating the assets through which fund managers and the UUK then present ersatz deficit figures through which to erode the express purpose and funding of the scheme. The USS palpably does not crease a predictable pension structure and it tendentially whittles away at level of expected retirement income.
Marx might have called this a commodity fetishism on the grandest and most larcenous scale: the product of labour spent presented back to the worker as an alienated deficit-bearing object, a ‘ticking timebomb’ to use that vulgar future wellbeing-depleting phrase. To take the USS and UUK’s discourse at face value is to be a worker paying a salary into a scheme that is then portrayed as a liability that requires you to forgo the benefits that you expected those payments to generate.
The suggestion here is that the USS is a deficit construction machine, tasked to create the political predisposition to fetishise pensions from an entitlement to a liability. Because it is a machine, there is no reason to expect it to stop. Which – with no expectations of any particular victory or outcome – is why it is vital to resist with as much collective energy as possible. At some point – distant for some and soon for others – this rage against the machine will have very concrete effects on the ways we each eventually move from being assets to liabilities.