At the Universities Superannuation Scheme, we agree with much of Martin Wolf’s analysis and prescriptions for the pension system (‘It is folly to make pensions safe by making them unaffordable”, Opinion, June 28).
The future is indeed unknowable. The cost of securing the absolute safety of pensions promised today, but due several decades from now, is indeed extremely high.
The economic cost of funding new “guaranteed” pensions has increased over the past decade, driven by higher asset prices and lower expectations for future returns across a sensibly diversified and suitably secure portfolio.
That is as true for USS as it is for other funded defined benefit (DB) schemes and even for “unfunded”, government-backed pension schemes.
USS is also a very large scheme compared to its sponsoring employer body — which includes a wide range of academic institutions. That means underestimating the cost of providing its pensions would prove…