The USS Trustee's risky strategy
Neil M Davies, Jackie Grant, and Chin Yang Shapland

TL;DR
This paper critically assesses the risk profile of the USS pension fund, estimating its likelihood of default and overfunding, and extends previous models with new analysis and potential extensions.
Contribution
It replicates and extends Miles and Sefton's model, providing a detailed risk assessment of the USS fund with new insights and analysis.
Findings
Less than 7% chance of default over pension duration
Over 80% chance of being overfunded by at least a3100bn
Nearly 50% chance of overfunding by a3400bn
Abstract
How much risk, and what types of risk, is the Universities Superannuation Scheme (USS) taking? This is a critical question for universities across the UK and many of their employees. Will the fund have enough money to pay for all our pensions? Will it run out? Or is there a significant risk that we are collectively overpaying? In September 2021, David Miles and James Sefton, from Imperial College Business School, stepped into this vacuum, publishing 'How much risk is the USS taking?'. The paper presents important, accessible and highly readable analysis which estimates how likely the USS is to default over time. Their work is particularly relevant to the current UCU dispute with 69 employers over the benefit cuts that Universities UK (UUK) is planning to implement on the basis of the 2020 USS valuation. In this Brief, we assess the assumptions, replicate the results, explore further…
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Taxonomy
TopicsFinancial Literacy, Pension, Retirement Analysis · Global Health Care Issues
